FACTORS INFLUENCING RESIDENTIAL PROPERTY VALUE
The house price is not only determined by the demand for the attributes of the dwelling units themselves, but also the area in which the properties are located. Location is the time-distance relationships, or linkages, between a property or neighborhood and all other possible origins and destinations of people going to or coming from the property or neighborhood. In other words, location is the relationship between the property and its surroundings.
Harold, W. E., and Leonard, V. Z. (1991) suggest that more distant locations may have more attractive features and amenities, despite their longer commute. Usually, all neighborhood properties have the same or highly similar locational relationships with common origins and destination.
The neighborhood is influenced by the surrounding community or metropolitan area. Each suburb responds to its own local demands for urban space. Many metropolitan areas include upper income households and they tend to live outside the center of the city, while lower income families continue to reside in the cities, close to employment centers.
However in Melbourne a trend seems to be occurring where by lower income families are now living further away from the city center and the city is increasingly in demand with new expensive apartments being constructed.
To analyze the impact of location in a neighborhood, the valuer must identify the important linkages and measure their time-distances or distance to and from properties (Fanning and Stephen, 1994). The linkage relationship such as the movement between, or proximity of, associated activities may be judged in terms of how well they serve the typical users of real estate in the neighborhood. For instance, single family residential neighborhoods, linkages with schools, grocery stores, and employment centers are usually the most important. Therefore, it is to identify and discuss neighborhood conditions and trends that enhance or detract from property values.
Public transportation is crucial for the numerous people who do not own cars or prefer not to use them during the day or week. Distance from public transportation is considered in relation to the people who are to be served by it.
For instance, urban apartment residents usually prefer to be within convenient walking distance of public transportation. Several studies on the relationship between transportation and property values can be found such as in the study by Chau (1998), the effects of improvement in public transportation capacity on a residential price gradient in Hong Kong and the study by John (1998), Transport investment and house prices.
On the other hand, income levels, profitability of business, inflation and interest rates are also important factors in determining general level of value at any given point in time (Gallimore, Fletcher and Carter, 1996). Households, which have the same tastes and income, tend to live within the same area. Therefore, the factors such as the size of households, their age, income and education levels and the availability and cost of mortgage financing have to be incorporated in affecting the types of housing and the values. High-income residents will seek out a part of city that may offer leisure facilities, parks, amenities and the most convenient form of transportation and infrastructure. This also reveals that the proximate and relevant influences on the property are related to the same influences operating on other properties in the neighborhood.
Moreover, social considerations in neighborhood analysis involve characteristics of neighborhood occupants. They may affect real estate value. Relevant characteristics may be the availability and quality of services, including recreation facilities and shopping. Residents are attracted to a location because of status, physical environment, and availability of services, affordability, and convenience. However, residential groups generally socialize with those of a similar educational, cultural or social level.
The important social characteristics include;
• Quality of educational, social, recreational, cultural and commercial services.
• Community or neighbourhood organisations (e.g. neighbourhood watching area).
• Occupant age levels, particularly important in residential neighbourhoods.
In addition, it is difficult to attempt to relate the preferences to an effect on property values. An appraiser should not place too much reliance on social influences when arriving at a value conclusion. Mann (1982) analyzed the effects in the housing values of altering school boundaries in an urban area. He found that changing the school boundaries associated with a house affected the value of the house. This finding of Mann (1982) may not be so applicable to the Melbourne housing markets. Another consideration is to environmental attributes that consist of any natural or manmade features that are contained in or affect the neighborhood and the neighborhood’s graphic location. The important environmental considerations include open space, nuisances, hazards emanating from nearby facilities such as shopping centers, factories, and schools; adequacy of public utilities such as street lights, sewers and electricity; general maintenance; street pattern, width, and maintenance. An excessive volume of vehicular traffic or odours, dusts, and noises from commercial or manufacturing enterprises restrict a residential neighbourhood’s desirability.
REFERENCES
1. Herold, W.E., and Leonard, V.Z. (1991), “Tenure Choice, Housing Demand and Residential Location”, Journal of Real Estate Research, Vol. 6, No.3,pp. 341-356.
2. Fanning, Stephen, F. (1994), Market analysis for Valuation appraisals, Appraisal Institute.
3. Chau, K.W. and Ng, F.F. (1998), “The effects of improvement in public transportation capacity on residential price gradient in Hong Kong”, Journal of Property Valuation & Investment, Vol. 16 No. 4, pp. 397-410.
4. Gallimore, P., Fletcher, M., and Carter, M. (1996), “Modelling the influence of location on value”, Journal of Property Valuation & Investment, Vol. 14 No. 1, pp. 6-19.
5. Naruson Romkaew (nd). Evaluating the contribution of infrastructure effects On residential property. Post Graduate Student, RMIT
