Venture Into Valuation: 5 Risk Factors To Consider Before Purchasing Property
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It would be handy to have a crystal ball to consult before purchasing a property. Often decisions can be clouded by emotions, timing and lack of understanding. It's important to take a step back and understand the risk factors that affect property value now and in the future.
Property value - what are the risk factors to consider before purchase?
We'd all love to believe that property goes up in value. But the reality is; past growth doesn't always equate to future growth.
Here are 5 important factors to consider when making a risk averse property purchase decision:
- MARKET RISKS
- Interest rate rises
- Economic slowdown
- Increase in development of comparable property within close proximity leading to supply increases
- The likelihood of a fall in demand for comparable properties
- OCCUPANCY/CASH FLOW RISKS (if investment property purchase)
- Existing tenant/s vacates
- Reduction in achievable rents
- LAND/TITLE RISKS
- Onerous Easements/Encroachments
- Restrictive Easements/Covenants
- Development Restrictions (Local authority planning/building approval)
- Contained within floodway's etc.
- Zoning Issues
- LOCATION RISKS
- Factors which negatively impact on the desirability of a locality (eg. close proximity to railway lines, airports/flight paths, industrial properties, correctional facilities, high voltage transmission lines, mobile phone tower & excessive noise)
- Environmental hazards
- Onerous heritage affectation or preservation orders
- Landslip or mines subsidence
- Main road acquisition
- IMPROVEMENTS RISKS
- Hidden faults/ Building defects
- Unapproved extensions
- Higher than anticipated cost of repairs
- Deterioration in condition of improvements
- Pest infestation
- Restrictions on access to the property
There are a wide range of factors that can have a negative impact on a property's market value, including both insurable and uninsurable risks. This is just a small sample of considerations, please contact us if you would like to learn more about our property valuation and advisory services.
