Property Value Demystified: What You Need to Know as a Physician

As a physician, understanding what determines property value is indispensable to your personal plans, whether you’re investing in real estate, seeking a home close to your practice, or considering a new location for your clinic.

Given your demanding schedule and professional requirements, knowing what influences a property’s worth can help you make informed, well-placed financial and logistical decisions.

Let’s break down the key factors.

What Influences a Property’s Value?

1. Location

The single most significant factor in determining a property’s value is its location. A home’s surroundings influence everything from its market desirability to its long-term appreciation, with homes in safe, convenient, affluent neighborhoods costing the most.

Proximity

Homes within walking distance of schools, parks, shopping centers, and reliable public transportation systems tend to sell for an average of 23.5% more than their alternatives. This is because homeowners tend to seek convenience.

Safety

Buyers also prioritize safe neighborhoods; they’re ready to pay a premium if that guarantees their family’s safety and the proximity to multiple amenities.

Violent crime is the biggest deterrent; a 2012 report by the Center for American Progress indicated that a 10% reduction in homicides would lead to a 0.83% increase in housing values the next year, according to property data.

Future Developments

In addition, future development plans can impact the price. Areas slated for new infrastructure, such as malls, hospitals, schools, or business districts, often see their property values rise as these projects materialize.

Although this is an extreme example, research by Nationwide shows that properties located within 500 meters (0.3 miles) of a metro station in London carry a 10.5% premium compared to those located a kilometer (0.62 miles) away. In fact, the Crossrail project (Elizabeth Line) was expected to increase property values by 5% before 2019 in some locations.

The consensus is that projects universally influence surrounding properties; this phenomenon isn’t unique to the UK. If you’re an aspiring investor, it’s a factor you should pay attention to.

2. Property Condition

Initial Condition

A home’s state is one of the major determiners of its market value. Properties that are well-maintained and ready for moving in are the most desired and highest in value, whereas homes with visible wear and tear generally receive lower offers.

However, if a property requires major repairs—like a leaky roof, foundation cracks, or outdated systems—buyers will be wary of hidden costs, and they might defer away from it altogether.

Enhancements

Homeowners can also invest in their home before selling by renovating or modernizing it. Properties with remodeled kitchens and bathrooms, hardwood floors, revamped entryways, fresh interiors, and good structural integrity stand out and attract higher offers.

A property with a neat, well-maintained curb can be valued up to 10% higher. If it’s surrounded by mature trees, they can boost its value by 15%. Similarly, a paved driveway can add up to $10,000 to its worth.

The added value of other upgrades depends on the buyer’s taste, the materials used, the scope of the upgrades, their convenience, and functionality. Most enhancements fall into a return on investment range of 50% to 95%.

For more information, check out our post about increasing a property’s value.

3. Property Size

Naturally, bigger homes are pricier—a home’s total square footage matters, especially if it’s liveable and functional.

Homeowners appreciate properties with larger living areas, more bedrooms, and additional bathrooms. Extra spaces, such as basements and flex rooms, also increase appeal.

Beyond a property’s indoor spaces, major contributors to its value are functional outdoor areas: patios, gardens, yards, and fire pits, especially in warm regions, such as California and Florida.

4. Market Conditions

Broad and local market conditions directly influence property values.  

When demand exceeds supply, the market becomes a “seller’s market,” and prices typically rise. Conversely, when supply outweighs demand, prices fall, leading to a “buyer’s market,” where prices are friendly to prospective clients.

Such fluctuations are influenced by various economic trends, which we’ll go over later.

5. Comparable Properties

A home’s value can also be estimated, or determined, by similar homes in the area. Your real estate agent will look at comparable properties (comps) to provide you with a robust comparative market analysis report. Comps are recently sold homes in the same area with similar features, such as size, age, and condition.

If your home has unique property characteristics—a larger lot, a pool, a remodeled kitchen, or a finished basement—its value might be adjusted upward compared to similar properties. The opposite is true; if its condition is worse, its value may be adjusted downward.

Before buying a property, analyze its comparable ones to get a useful starting point for its assessed value and pricing.

6. Economic Factors

Beyond the state of the real estate market, broad economic conditions influence property values.

Mortgages

Interest rates are the most influential factor. They affect how much buyers can afford to borrow from mortgage lenders. Lower rates make borrowing cheaper, which increases demand and drives up prices. Conversely, high rates slow the market down by making mortgages less affordable.

Inflation

The same rule applies to low unemployment rates and growing wages. Areas with thriving job markets and stable industries see increases in property values as they attract buyers. However, when inflation and construction prices rise, they push the prices higher with them.

Keep an eye on the economy to gain valuable insights into real estate trends.

7. Zoning and Regulations

Zoning laws determine how a property can be used, and thus its value. Properties reserved for commercial or multi-family use are often more valuable than those limited to single-family residential purposes, as they’re more flexible development-wise.

Restrictive rules can lower value. For example, if a property or its surroundings have historical significance, property owners will be limited in terms of what they can change or renovate. So, a buyer seeking modern conveniences or a fixer-upper to renovate in alignment with their goals in mind will likely find them less appealing.

Before buying a particular property, learn about zoning and regulation laws and assess whether they can prevent you from maximizing its potential.

8. Curb Appeal and Surroundings

A property’s curb determines the first impression that potential buyers get.

We mentioned how a well-maintained exterior, neat landscaping, clean driveways, and an attractive entryway can create an inviting feel and entertain the perception of high value by contributing up to 10% to a home’s cost. However, this extends to its surroundings, too.

If the property falls in a neighborhood that’s tidy, well-kept, and free of eyesores such as deteriorating buildings and shady individuals, it’ll attract an influx of enthusiastic buyers. But even if the home itself is perfect, an unappealing neighborhood will drive down its value.

9. Age and Historical Significance

While it’s a subjective matter, a property’s age and historical significance can greatly influence its appeal to certain buyers and drive its price through the roof.

Newer homes are generally favored by most buyers due to their modern amenities, lower maintenance requirements, and overall convenience.

However, well-preserved older homes with unique architectural styles and charm attract buyers willing to pay a premium. The allure of such homes lies in their character and historical significance; however, most old homes require substantial investments in repairs and modernization.

For many, the ideal property balances historical appeal and modern convenience.

10. Future Potential

Many experienced real estate investors recommend investing in fixer-uppers—homes with promising potential—or properties in areas slated for future developments. They can be purchased at a lower sales price compared to fully renovated homes.

Property Potential

Homes with unfinished spaces, like basements or attics, appeal to buyers looking for opportunities to bring their vision to life. The space is already there; it just needs to be customized or altered according to personal tastes.

Location Potential

The same applies to the property’s immediate surroundings. If the area is slated for developments, such as infrastructure improvements, it’ll be more desirable and boost property values over time.

Smart investors often look for properties with unrealized potential as they offer a higher return on investment in the long run.

Make Smart Financial Decisions with Physicians Thrive!

Understanding what determines a property’s value is key to making sound financial decisions.

Our experts at Physicians Thrive are here to guide you through the confusing real estate market with confidence.

Contact us today to learn more!