How is the price of real estate determined?

Prices depend on too many factors, since real estate itself is a complex product, its price is made up of the prices of all the products that are used in its production. And also the total price of real estate varies with the different values of the sub-products that are used.

Much has been written recently about the level of real estate prices. The sector was at the heart of the financial crisis that unfolded. My recent observations are of mass hysteria about price levels and more specifically prices per square metre as they are popular in the country. But what is behind these prices? Few people are asking themselves that question. Most of them ask how much it is, get a bare figure and don't care any more. But why is it so much, why isn't it less, why isn't it more, no one asks. What is behind this figure I will try to explain below.

The most important component of the price of real estate is location, or the price of land. Different neighborhoods and areas have different layouts, occupants, and character, which determines different land values in different places.

The construction itself is generally divided into two stages - rough construction and finishing. The cost of rough construction is relatively constant due to the fact that few products are used. Differences are mainly reflected in the cost of finishing. The higher the quality of the finishes used, the higher the value of the home. But the important point is elsewhere and is quite often overlooked and downplayed. Higher quality materials cost more now, but will result in savings in the future that reduce your monthly costs. For example, better insulation and joinery will lead to lower heating bills. Solar water heater collectors reduce water heating costs, natural hardwood flooring can be used for 30 years or more, while laminate flooring scratches and is replaceable by the third year, and much more.

The degree of finish also makes a big difference in determining the price of a home. The presence of tiles - tiles in the wet rooms, granite or terracotta in the common areas, laminate or parquet in the living areas, kitchen and bathroom furnishings such as cabinets, electrical appliances and sanitary ware are factors that increase the price of the home, but save a lot of time and effort for future owners, especially if they are pressed by this factor.

Most of the reputed developers take out investment loans to have more certainty of completing a particular project, largely eliminating market demand as a factor determining the financing of a particular project. On these loans, they incur a lot of costs such as interest and fees to the financing bank and include these costs in the price of the homes they sell. The cost is higher, but the time factor is much less risky, unlike investors who rely only on pre-sales and their own funds to implement projects.

Other determining factors are the services provided by some of the new complexes, such as playgrounds, bars and restaurants, a different number of shops, management of common areas, services that, although now paid more for their presence, save time and effort for the future, time that cannot be measured in money.

The availability of parking, underground or surface, is another pricing factor. This growing problem, for which there is still no centralised solution, has led many developers to create their own car parks, which are in most cases paid for, but which are a great convenience for the growing number of cars on the country's roads.

The reputation of the investor is also a pricing factor. Large investment companies maintain entire teams of people dedicated to customer service. They can be relied upon to get a good attitude, transparency of information, good customer service and most importantly they will be able to honour their building warranty imposed by Regulation No2, to the Building and Construction Act.

For older properties, improvements made to the property play a very important role in pricing. The normal lifespan of a dwelling as a structure is 30 years, and for all installations and insulation is 10 years. If the owner has repaired or replaced some of the installations or has renovated the dwelling, then the life of the dwelling increases, as a consequence of which it is normal to ask a higher price. Most sellers of this type of home make such renovations to give a more commercial feel to their properties.

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