Sometimes you really struggle hard to sell your property or rent it. You try this on your own. Then you turn to an estate agent, then to the next. You spend on adverts and faithfully service your mortgage. You feel very frustrated.
Could it be that you overlooked something when you were investing in the property? Most probably yes. What you overlooked could be one or more of the following building blocks of value. They are the things that make someone want to buy or rent your property.
Utility is the ability of a product to satisfy a human want, need or desire. A person would want to buy your house because he needs the house for shelter. An industrialist will want to rent your premises because he needs it to manufacture goods. A commercial property is required for the income stream it generates.
Location of a property, or the design of a property increases its level of utility. Creating a property that has low utility will only result in low demand for it as it must compete with others in the market. It is common to find a developer starting to construct an apartment block and by the time it is complete it has changed to an office block or a retail building. The consequences of this are design challenges that tend to reduce the utility of the building for the ultimate use. A developer may want to increase income by putting so many units on a smaller parcel of land. Again this reduces the property’s utility as tenants would not want to feel crowded in a complex.
What must you therefore do? Develop a property that is fit for the purpose.
Scarcity is a measure of supply relative to demand of a product. If the supply of a product is low, and the demand is high, this means the product is scarce. Many people chasing few products in the market tend to compete. If others get it others must miss it. This competition makes individuals want to pay more to get the product. A product is hot only because there are few of them in the market.
On the other hand, if supply of a product type is higher relative to the demand there will be less competition for the product. Continuing to produce the same product because it is hot only lower the level of its scarcity making it abundant and ultimately lowering its price.
The only way to sustain demand is to produce a unique product. Every time you develop a unique product of utility, you end up with a scarce product.
What must you therefore do? Develop a unique product through creativity and innovation.
Desire is the purchaser’s wish for an item to satisfy human needs. Desire creates interest and interest leads to purchase or renting a property. Some people desire to live in a large compound. Some desire to live in a hotel apartment. If no one desire to live in your property, no one will be interested to buy it or to be your tenant. Desire comes from the inside of the person and not from expensive adverts. You must therefore appeal to the inner part of the buyer or tenant.
What must you therefore do? Arouse the desire in others for your property.
4. Effective purchasing power
This is the ability of an individual to purchase the property. Developing a property without due regard to the purchasing power of your target group is suicidal. If tenants can’t afford it, they can’t rent it. If the buyers can’t afford it, they can’t buy it. You must know who the buyers or the tenants of your property are before you start construction. You must understand their behaviour. Should they change their mind, you should be able to forecast what they will change it to. You should be ahead of them and take full advantage of them.
What must you therefore do? Identify your tenant or buyer before you build.
This article is available in Land & Property Digest, May-July 2015 Issue No. 10