7 factors which determine the value for your property - Proven by research

Research studies conducted across the world, especially in developed economies, have used multiple methodologies to determine real estate values and the parameters determining it. The most popular among these is the hedonic model which ascertains value based on the distance from the central business district (also referred to as CBD), access to light rail transport and expressways amongst many other variables. The formula given below, shows the price function in the Hedonic regression model as a combination of factors like structural characteristics (s), neighbourhood characteristics (n), and environmental characteristics (e).

Price Function (P) = f (s1, s2, s3...sj; n1, n2, n3,...nj; e1, e2, e3,...ej)  Source:Wikipedia

Drawing from some of the best research worldwide, we list down seven critical attributes which have been proven to affect property values: 

1. Access to Light rail transport (LRT) - 'Al Mosaind, Dueker and Strathman' claimed a positive correlation between distance to LRT and property values. They argued that properties which were within 500 meters of the LRT got a much higher value, since it improved citizens accessibility to CBD and other job areas within the city. A perfect example is the monorail development within Trivandrum which could improve access to the CBD for the smaller suburbs and amplify real estate rates in areas which are in the vicinity of the proposed station. The correlation with accessibility seems to become void if the property is more than 1.5km away from the station of interest. 

2. Distance to CBD - A study done in Ohio (United States) for a period of five years and another done in Sydney (Australia) point out that distance to CBD is a critical determinant of real estate prices. Most researchers argue that this variable is more critical than accessibility mentioned above,although positive correlation does exist for the latter. However as cities become poly centric with multiple CBDs instead of being monocentric, real estate prices would be determined with respect to proximity to a particular CBD in the zone or the suburb. At present only MG road could be considered as the central business district within Trivandrum with a majority of banks, retail and business houses located in the area. With new retail and business hot spots emerging at Vellayambalam, Pattom and Kazhakuttam, new CBDs could emerge within the next decade in a poly centric model within the city and change the real estate pricing pattern. 

3.Clustering - As per the spatial distribution phenomenon, properties of a similar value appear clustered together than widely spread out. 

4. Promixity to Highways and Expressways - Properties located upto 2kms from major highways and expressways showed a much higher value and appreciation across many global studies. 

5. Proximity to Regional Shopping centers - Research has also shown than real estate which is in proximity to malls, and other regional shopping centers are more expensive than rest of the sample. At the same time, properties located too close to the shopping units saw a drop in real estate rates due to higher levels of noise, pollution and crowding on the streets. The buffer zone was usually about 2kms from the shopping area, within which, the prices seems to be lower due to above factors but increased incrementally after that. 

6. Comparable Sales Approach - 'Can and Megboulougbe' in their research proposed the comparable sales approach wherein they said that price history in the immediate neighborhood of the given property will have a spill over effect on the given property's market value. The lesser the distance between the anchor property (which got sold at a higher price) and the given property, the more the impact on the value. This correlation seems to nullify if the anchor transaction happened before six months or if the anchor property is more than 2kms away from the given property. 

7. Structural attributes - This refers to the size and type of the property. International research concludes that number of bedrooms and washrooms tends to have a positive effect on the property value given that all other factors are the same. Strucutral attributes by itself pales into insignificance if spatial parameters mentioned above are not favorable for the given property. Centralised air conditioning and even presence of senior citizens in a property tends to more propitious as per research. 

In summary a host of factors typically decide property rates and you can get a realistic approximation of value based on these. Since studies of a similar nature spread across many years have not yet been conducted in Kerala or for that matter Trivandrum, the true sense of if any of these seven factors have a particularly significant influence for real estate in the city is left to be ascertained. These 7 factors could act as guiding principles in helping you choose your dream home or property in the Trivandrum or Kerala market.