Influential Factors on the Market Value of Residential Properties

When using sales comparison approach, it is crucial to apply adjustments based on the differences between the appraised and comparable properties. Estimating the significance of each adjustment is of key importance for performing credible valuation. Adjustments should include factors such as location, physical and functional characteristics of residential properties and external influential factors. The aim of the article is to determine importance of influential factors and to quantify adjustments that arise from selected factors. Analytical results about the importance of factors influencing the appraised value of residential properties as perceived by different experts are presented in the empirical part of the article. The following factors were included in the study: orientation, views from the property, noise, number of storeys, and the age of the building. Data needed in the study were collected through interviews with authorised real estate appraisers, court sworn appraisers and real property agents. The key scientific problem was to determine mathematical functions for adjustment that arise from the storey of an apartment and from the age of the building. The findings of the study indicate that the location in relation to the distance from the city centre is the most important influential factor on the property value, similarly as in other countries across the world. Furthermore, the survey results show that the impact of the views and noise on the residential property value in Slovenia is also comparable with other studies. Results on the quantification of adjustments expectedly show that prices rise per storey in case there is an elevator in the building, but the result is opposite in case there is no elevator in the building. Results also show the influence of age on the value of the building. Based on mean values a linear function of annual depreciation rate has been set, which is the key novelty of the research. This function and the adjustments presented in the article are usable in valuation practice.