Putting a value on the stand

How important is the stand on which a house is built? Or rather, what percentage of the purchase price can be attributed to the land component?

“In quite a number of cases these days,” says Harcourts Africa CEO Richard Gray, “buyers are actually putting very little value on the bricks and mortar part of an existing home and are purchasing properties simply to gain access to land in a prime location.

“This is especially evident in areas such as Constantia and Clifton in Cape Town and Sandhurst and Rosebank in Johannesburg, where many older homes are being demolished to make way for new houses and townhouses on choice parcels of land.”

However, he notes, even in normal circumstances it does not necessarily follow that the bigger the stand, the more the buyer would pay for it.

“Depending on buyer requirements, the ‘usability’ of a stand frequently outweighs the importance of its size when it comes to calculating its value. For example, a house situated on a large piece of property that is very steep may well sell for less than a similar house on a smaller, level stand if what most buyers in that area want is space for outdoor entertaining, children, pets or gardening.”

Similarly, says Gray, a large home with minimal land – perhaps because the property has already been subdivided, as in cluster developments – may well be attractive to professionals or executives with no children and little time to maintain a garden.

“Market conditions also enter into the equation. When the number of homes for sale is high and buyer demand is low, buyers are usually willing to make fewer concessions on stand size, shape and character.

“And certainly, it is wise to consider the way the stand will affect the resale potential of a property before you buy it. A good local agent will be able to tell you what most buyers in the area want, and you may find that homes with low maintenance stands and a sense of privacy are in the highest demand – in which case size will not play that big a role.

“But you should also bear in mind that buyer preferences can change and a home that is on a substandard stand could be difficult to sell in the future.”

Article by: www.harcourts.co.za