House prices aren’t moving much in many parts of the country – but what could cause the value of your place to drop?
Property experts identify a range of factors that can influence a property’s value, some within a homeowner’s control and others dictated by external circumstances. While broad economic trends play a role, localized issues can have a surprisingly significant impact on sale prices.
Neighbourhood Matters
The condition of neighbouring properties can be a key determinant of value. Property economist Ed McKnight notes that a neglected neighbouring property – characterized by overgrown lawns, accumulated rubbish, or vehicles parked on the front lawn – can hinder a homeowner’s ability to achieve a premium price. “It’s hard to quantify this in data,” McKnight said, “But buyers tend to pay premium prices for the dream home. If next door makes it seem more like a nightmare, then the price premium will fall.”
Development and Density
Increased density through new construction can also temporarily depress property values. McKnight cited an example in Ōrākei, Auckland, where a homeowner faced challenges selling while a neighbouring property was demolished and replaced with a five-story apartment building. “Just as this owner was trying to sell, the neighbour was bulldozing their house and knocking up a five-storey apartment building. It was hard to get someone to pay a premium price for a property when there’s going to be noise and disturbance next door for the following three years.” This highlights the impact of short-term disruption on perceived value.
However, the long-term effects of increased density are more nuanced. While some buyers prioritize privacy and sunlight, others may find value in areas with more housing options. Cotality chief property economist Kelvin Davidson points out that government initiatives promoting intensification and infill housing are reshaping the market. In areas with a high concentration of new townhouses, properties with gardens and garages may become comparatively more desirable.
Environmental and Infrastructure Concerns
Environmental factors and infrastructure issues are increasingly influencing property values. Recent weather events have heightened awareness of flood risk, with properties in flood-prone areas potentially facing lower valuations. Approximately 20% of buildings in Auckland are considered susceptible to flooding and prospective buyers are advised to research this risk before making a purchase.
The presence of infrastructure like power lines can also negatively impact value. McKnight previously stated that properties within 250 meters of power lines could be worth up to 20% less than comparable properties further away. The impact diminishes with distance, becoming negligible beyond 250 meters. However, power lines that obstruct views can lead to even greater price reductions, potentially as much as 27%.
Nuisance Factors
Certain local nuisances can also detract from property value. Flight paths, for example, can be a concern for some buyers, although studies on the impact of aircraft noise have yielded mixed results. Similarly, proximity to correctional facilities can create a stigma, with some surveys indicating that buyers may expect a discount of nearly a third for properties located nearby. However, the presence of a prison can also bring economic benefits to areas with limited employment opportunities.
Problems with sewage ponds, as experienced in Christchurch, can also devalue properties. Offensive odours and potential health concerns can deter buyers and negatively impact quality of life.
The Limits of Control
A recurring theme among experts is the limited control homeowners have over many of these factors. While maintaining a well-kept property is essential, external influences – such as the actions of neighbours, development projects, and environmental risks – can significantly affect value. McKnight emphasizes that even the best-maintained property can be negatively impacted by a poorly maintained neighbouring property.
understanding these potential pitfalls is crucial for both buyers and sellers. Thorough due diligence, including researching local development plans, flood maps, and potential environmental hazards, can help mitigate risks and ensure a sound investment.
