Complex Made Simple

Factors that drive down a home’s market value

Investing in a house is one of the best financial moves you can make, with housing remaining one of the world's best and most stable investments in the last 150 years, with the annual return just over 7% when adjusted for inflation.

However, there are many factors that will affect your property's value over time These can be environmental, man-made or even relating to the geography Regardless, risk when investing in property is often low

Investing in a house is one of the best financial moves you can make. Quartz highlights how housing has remained one of the world’s best and most stable investments in the last 150 years, with the annual return just over 7% when adjusted for inflation. This is coupled with the fact that the risk associated with housing is considerably low, makes it a solid investment across the globe.

And while this is still true for the most part, global issues such as climate change are starting to affect how homes are valued. This is why it’s become more important to be aware of the factors that can drive down a home’s market value. Whether you’re a buyer or seller, it would be best to know about these factors so you can make informed decisions moving forward. Read on to know more about issues that can drive down a home’s market value!

Water Damage

Water damage is something that every homeowner dreads but will have to deal with at some point. Either in the form of burst pipes or unexpected flooding, unforeseen leaks continue to plague homes all over the world at the most inopportune times.

And while water damage is often barely noticeable, it leaves room for lingering mold residue, moisture, and dampness. This can lead to serious health issues and a significant drop in your home’s value. As such, HomeServe advises conducting regular checks for leaks in your home by looking out for changes in water pressure, monitoring heat levels, and checking your toilets and tanks. We know this may seem like an inconvenience now, but think about the amount of money you’ll save by getting ahead of the issue and nipping it in the bud before it gets too serious. Not to mention the fact that you’re legally obligated to let potential buyers know of any water damage that has occurred in the house, which will undoubtedly lower its market value.

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LocationSpeaking of flooding, houses from all over the world have now been made susceptible to a new threat due to the growing concerns associated with global warming and climate change. Market Watch details that 311,000 coastal homes in the United States will be repeatedly flooded or completely lost in the next 30 years if the sea-level calculations are correct. And while the effects of climate change on the housing market are more gradual, experts believe that the losses will be greater than that of the housing crisis and the Great Recession.

While there’s nothing better than exhibiting a little foresight and avoiding coastal areas, there are things that you can do to prepare for the imminent effects of climate change. For example you can incorporate air-filled concrete bases that allow houses to float in case of heavy flooding.

Old Fashioned Power Sources
Factors such as climate change have encouraged innovation. Thanks to technology homes have also begun to become more environmentally friendly. PH Real Estate’s Managing Director Nick Grassick outlines how more and more new structures are incorporating solar power through the use of panels, with some structures even being designed in a way that’s optimal for solar power use.

Due to these innovations, homes that refuse to get with the times and make the switch to newer forms of energy are starting to lose value. Studies conducted at the Department of Energy Berkeley National Laboratory have found that homes with solar power have an average of ‎55,100 AED added to their total value. Keep this in mind when designing your home, as solar power is looking to be quite the investment moving forward.

Read: Proptech 3.0 and the UAE’s real estate sector

Fracking

Here’s one that’s not as common as the rest but has just as much of an effect on the value of your home. Fracking, slang for hydraulic fracturing, is the process of creating fractures in rocks and rock formations by injecting fluid into the cracks to split them open. It is done to extract natural gases from underground rock formations. The Economist details that fracking is starting to affect the housing market due to the potential impact on water quality.

Unfortunately, there’s not much you can do to get around this problem as fracking can potentially pollute local aquifers. You can, however, equip your home with a rain collection system that’ll at least add some substantial value to your home.

Unusual Colors and InteriorsWhile showing off your personality and taste is always a good thing, unusual colors and interiors tend to dissuade potential buyers. Put yourselves in their shoes and see how a house that sticks out from the rest of the neighborhood may not be to everyone’s liking.

The Hidden Cost of Selling report by Zillow highlights how sellers spend a significant amount of money repainting a house’s interiors and exteriors. If you want to take it a step further, try painting your interiors with a yellow tone as these colors amplify light and help it bounce around the room without being overwhelming. While there are no objective ways for looking at this, it would be in your best interest to avoid overly bright colors such as pink and orange as these tend to be quite divisive.

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