Realtor training 101: Property valuation and pricing
Last time out, we continued our realtor training series by looking at the Nigerian Property Market Overview. In the third part of this series, we would be looking at Property valuation and pricing.
One of the key aspects of real estate is property valuation and pricing. Accurately valuing a property is important for several reasons, such as determining the appropriate asking price for a property sale, determining the value of an estate for probate, or assessing the value of a property for mortgage lending purposes. In this chapter, we will discuss the principles of property valuation, the methods of property valuation, factors that affect property prices in Nigeria, and how to price a property for sale or rent.
Principles of property valuation
The principles of property valuation are based on the economic concept of supply and demand. The value of a property is determined by the balance between the supply of properties and the demand for them. The more properties available for sale or rent, the lower the value of each property. Conversely, the higher the demand for properties, the higher the value of each property.
Other important principles of property valuation include location, physical characteristics of the property, and the current economic climate. Location is a crucial factor in determining the value of a property. Properties in desirable locations, such as areas with good transport links, good schools, and other amenities, will command a higher price than properties in less desirable locations.
The physical characteristics of a property, such as its size, number of rooms, and condition, will also impact its value. Properties with more rooms, larger floor space, and in better condition will generally command a higher price than properties with fewer rooms, smaller floor space, and in poor condition.
Methods of property valuation
There are several methods of property valuation that are commonly used in Nigeria, including the sales comparison approach, the cost approach, and the income approach.
The sales comparison approach is the most common method of property valuation. It involves comparing the property to similar properties that have recently sold in the same area. This method takes into account the location, physical characteristics, and other factors that affect the value of the property. The sales comparison approach is particularly useful for valuing residential properties.
The cost approach involves determining the cost of building a similar property from scratch, taking into account the cost of materials, labor, and other factors. This method is particularly useful for valuing new properties or properties that have been recently renovated.
The income approach is used for valuing commercial properties, such as office buildings or shopping malls. This method involves determining the income that the property is likely to generate over its lifetime, taking into account factors such as rental income, maintenance costs, and other expenses.
Factors that affect property prices in Nigeria
Several factors affect property prices in Nigeria, including location, economic conditions, and government policies.
Location is perhaps the most important factor that affects property prices in Nigeria. Properties in desirable locations, such as Victoria Island, Ikoyi, and Lekki, will command a higher price than properties in less desirable locations. The location of a property also affects the cost of building or renovating the property, which in turn affects its value.
Economic conditions also play a significant role in determining property prices in Nigeria. A strong economy with low inflation and high levels of foreign investment will generally result in higher property prices. Conversely, a weak economy with high inflation and low levels of foreign investment will generally result in lower property prices.
Government policies can also affect property prices in Nigeria. For example, changes to property taxes or zoning laws can affect the value of a property. Additionally, government policies that affect the economy, such as changes to interest rates or the availability of credit, can also impact property prices.
How to price a property for sale or rent
Pricing a property for sale or rent involves several steps. The first step is to conduct a valuation of the property using one of the methods discussed earlier, such as the sales comparison approach. This will provide a baseline value for the property, which can then be adjusted based on other factors such as location, physical characteristics, and market conditions.
The next step is to research the local real estate market to determine the prices of similar properties in the area. This will help to ensure that the property is priced competitively and is not overpriced or underpriced. Real estate agents can provide valuable insights into the local market and can help to determine an appropriate asking price for the property.
It is also important to consider the current economic climate when pricing a property. If the economy is strong and there is high demand for properties in the area, it may be possible to price the property higher than during a weaker economic period. Conversely, if the economy is weak and there is low demand for properties, it may be necessary to price the property lower to attract buyers or renters.
Other factors that can affect the price of a property include the condition of the property, the level of demand for properties in the area, and the level of competition from other sellers or landlords. It may be necessary to adjust the price of the property based on these factors to ensure that it is priced appropriately.
When pricing a property for sale or rent, it is important to be realistic about the price. Overpricing a property can lead to it sitting on the market for a long time, while underpricing a property can result in lost revenue. Real estate agents can provide valuable insights into the appropriate price for a property based on market conditions and other factors.
Property valuation and pricing are important aspects of real estate in Nigeria, particularly in Lagos. Accurately valuing a property involves taking into account factors such as location, physical characteristics, and economic conditions, and using one of the commonly used valuation methods, such as the sales comparison approach or the cost approach. Pricing a property for sale or rent involves researching the local market, considering the current economic climate, and adjusting the price based on factors such as competition and demand. With careful consideration of these factors, it is possible to determine an appropriate and competitive price for a property in Lagos, Nigeria.
Access previous posts in this training series
Part 1: INTRODUCTION