You must have heard that real estate markets are rarely the same even within close proximities, and wondered why it is so.
The real estate market in a locality is different from what is obtained in another area, and from one state to another. This is why it is a mistake to compare a property you want to buy in a place with the one you have in another location, especially if the properties are in different states.
As a buyer or seller in a new market, it is important you understand the local market and work with a local real estate agent for a smooth experience.
So, the question is, what are the factors responsible for the disparities in real estate markets? Some of them are discussed in the section below.
Market Values of Homes
Attempting to determine the market value of a home by merely using the internet or relying on the judgments on someone who is in a different location and is not familiar with where the home in question is located might lead to inaccurate conclusions. The values of homes are one of the variations between real estate markets.
In Nigeria, for instance, if you have two identical homes with similar features in Ikeja and Lekki areas of Lagos State, they are certainly not going to worth the same price. The home in Lekki will sell higher even though Ikeja is also a highbrow area. You can only compare the values of homes in the same location since the factors that influence the values of homes in the location are the same.
To determine the value of homes in the same location, you need to consider the sale prices of similar homes that have sold recently. You can also do a home appraisal or ask a local real estate agent to conduct a comparative market analysis since they will most likely understand how the local market works.
Real Estate Property Tax
Another factor that contributes to the differences in real estate markets is property taxes. Real estate property taxes cannot be avoided as they go hand in hand with owning properties. They are payable on all properties situated in designated areas within a state.
In Nigeria, taxes payable by players in the real estate sector include consent fees on the land transaction, land use charge, withholding charge, personal income charge, value added tax, ground rates, development levies, property levy, and community tax. These tax rates vary from one state to another, and while some of them exist in some states, they do not exist in other states.
Tax rates are also dependent on the types of properties involved. In fact, in the Federal Capital Territory, for instance, certain properties are exempted from some taxes. The properties include those owned and occupied by a religious body and used exclusively for religious purposes, real property owned by any person and used as a nonprofit, or real property designated and used for public purposes including public institution of learning, or for official or residential purposes by diplomats, palaces of recognised traditional rulers, as well as property owned and used for social welfare services by NGOs.
Style, Amenities and/or Features of Homes
Apart from the primary amenities in most homes, the amenities in some real estate markets will greatly vary from the different from what you get in other real estate markets. Buyers will most likely look for certain features in a home depending on the market.
In Nigeria for instance, most homes in Lekki, Lagos are terraced duplexes, fully-detached and semi-detached duplexes with some basic features which are known to the area. Whereas, the features will vary in other less popular areas.
There are markets that have homes with central air conditioning while others do not have. Some homes have basements, others do not.
The average age in real estate markets also differ. New locations just undergoing development will have newer homes compared to areas that have longed developed.
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Appreciation rates are another reason for the differences in real estate markets. In real estate, appreciation denotes an increase in the value of an asset over a period of time.
It is, therefore, a grave error to compare one real estate market to another, using average appreciation rate.
The rate at which properties will appreciate depend on several factors, including the location, features and facilities. A real estate market can have an average appreciation rate of say 4% while another will only command appreciation rate of about 2%.
These appreciation rates do not seem like anything but are worth more when an asset that is worth millions of naira is involved.
Real Estate Rules & Procedures
Real estate rules and procedures are different in real estate markets just as the laws vary from state to state. Some states require lawyers or attorneys to close real estate transactions while others do not.
Even within a state rules and procedures differ from market to market. In Lagos State, Registration of Title Laws governs the conveyancing and registration of property titles in some parts of the state, including Ikoyi, Victoria Island, Lagos Island, Surulere, etc. but not in others.
It is important you are conversant with the rules and procedures governing real estate transactions in the market where you want to buy or sell a property. This can make the process less stressful and hasten closing.
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As captured by the reasons above, real estate markets are largely different, from country to country, state to state, and even within a state.
Hence, when buying or selling real estate in a market that you are not familiar with, ask a local real estate agent or other professionals relevant questions.
When you understand the real estate market you want to operate in, the job will be easy and there will not be delay in closing.