What Brings Down Property Value?

signs of home damaged melbourne

Property values fluctuate as a result of many factors. Historically, a solid market finds values rising based on the economic condition of the area, jobs, availability of mortgage funds, improvements in neighbourhoods and the house itself. When they fall, the same values are calculated, and a depressive situation is reflected in a decrease in property values. Additional reasons for values falling also skew the market. Some influences you can do something about. Others take governmental action to remediate.

As an informed property investor, you should be aware of your property’s value at all times. Certain things can cause the market price to decrease. Some of these things, such as natural disasters, are out of your control. Here are three threats to your property’s value.

The Economy

If jobs are scarce in your locality, with layoffs occurring and homeownership put in jeopardy, values fall. Like a domino effect, fewer people can afford to buy a house. Owners lower their prices to compete in a diminished market. Short sales and foreclosures become more dominant than fair market sales, and values are skewed downward. A buyer’s market develops, and sellers lower their prices to compete.


A landfill leaking methane, reports of a cancer cluster, or installing a power plant nearby all lead to decreased home prices. A University of California at Berkeley study reported that the construction of a power plant within two miles of a home reduced its value between 4 per cent and 7 per cent. Landfills also decrease home value, with a report from the assessor’s Pima County office, Arizona, noting that 6 per cent to 10 per cent of housing value is lost if it’s near a landfill. Hazardous waste sites bring the devaluation of property up to 15-per cent.


If your home is outside of a controlled community, either a homeowner’s association or planned unit development, neighbours do not have strict regulations governing how they maintain their property. Your yard may be pristine, but your neighbours may be surrounded by a chain-link fence corralling barking dogs, with trash, disabled cars, motor homes, boats or other unsightly vehicles haphazardly parked on their front lawns. This will surely bring down the value of your home.

Lots of Foreclosures in the Area

A thriving neighbourhood isn’t one where you would expect to see homes boarded up and signs on the front indicating that a power of sale is happening. But if this is the situation on your street, that paints a bad picture of the area as a whole and can drag your property’s value down with it.

Unfortunately, your home’s fair market value can be negatively affected if there are a few homes in your neighbourhood that are facing foreclosure.

If your neighbourhood has a surplus of homes in foreclosure or available as short sales, your home’s fair market value is devalued. Buyers can purchase lower-priced homes nearby. To compete in this environment, you must show that your home is worth the additional money it’ll take to buy it by making improvements, maintaining the grounds, painting the exterior, repairing all defects and presenting a quality home. Finding the right duplex build  is an important decision. Check out our range of the best home design constructions at Hitch Property Constructions.

Bad Schools

Parents go to great lengths to make sure that their children receive a decent education, and they’re willing to pay the big bucks to buy into a neighbourhood that has highly-rated schools.

Homes located in a prestigious school district are usually more expensive than homes in an area with poorly rated educational institutions. If the area you’re in is known for its shady schools, it could scare buyers away and devalue your home.

Minimal Amenities

Buyers often look for convenience when buying a home, which means they like to see amenities nearby that they can reach via a short drive or walk. But a lack of such amenities can have a negative effect on property values, or at least make it more difficult to find willing buyers who will pay more to live there.

Bad schools, closed shopping centres, non-availability of medical facilities and shoddy road work all contribute to the devaluation of your home. Add in the existence of sex offenders in the neighbourhood, and you’ll scare away any families who may be interested in buying.

Proximity to Power Lines

Power lines play a vital role in modern life, bringing much-needed electricity to just about everyone. Unfortunately, no matter how important they are, power lines are not a good thing to have nearby when you are homeowners.

They buzz, they are imposing, they’re unattractive, and they make many people worry about adverse health effects related to living near them. The negative health effects of power lines are inconclusive. However, many people like to take the better be safe than sorry policy.

Some research projects suggest that living near high-voltage power lines can increase several kinds of cancer and other diseases. There is also some association with headaches, fatigue, anxiety, insomnia, rashes, and even muscle pain.

A home may seem like a genuine bargain if it is near power lines, but there is a reason for the low price. You should always consult with a local real estate expert when planning on buying near power lines to see how much it will impact a home’s market value.

renovation of houses melbourne

The Concentration of Sex Offenders

Nobody wants to live in an area that is littered with registered sex offenders. This type of information can easily be found online, and savvy buyers often take steps to search for this type of information before they determine where they want to live. The presence of sex offenders can be a significant factor in pulling home values down.


Similarly, a high crime rate in an area can lower property values. If the overall state of the community is on a downtrend, home values will dip as well.

Bad Neighbours

The people who live next door to you have an indirect effect on your home’s value. Neighbours who are noisy, obnoxious, and don’t take care of their property can make your home look bad, no matter how well you care for your home. All their trash, barking dogs, and inconsiderate yelling can be a bad thing for your home’s value.

Noise Pollution

Whether you live on a busy road, are close to the train tracks, or are located right along the flight path near your local airport, all that noise pollution can be a drag for your home’s value.

Outdated Finishes

Your home itself might be doing itself a disservice if it’s got outdated features and finishes that buyers these days are no longer looking for. Outdated kitchens and bathrooms, old appliances, and worn patios or driveways, for instance, can devalue your home.


Believe it or not, but the opposite situation can also be bad for your home’s value. If you’ve “over-improved” your home with finishes and features that are far too fancy or decadent compared to what the surrounding neighbourhood calls for, you could be doing the value of your home some harm.

Updates are often a great way to boost your home’s value, but you can’t always expect to recoup what you paid for those improvements if you ever decide to sell. The improvement choices you make should be based on similar homes in your neighbourhood. Going overboard in this department can put you at risk of spending far more than you’ll ever be able to get back if you sell.


The home-selling and buying season usually runs from May through August, when families can move without interrupting children’s school years. September historically shows a decline in home sales and values, and buyers become more scarce. The months leading to the US holiday season are also slow. However, if your home is in a sunny climate frequented by winter visitors, the September-to-February term can show an increase in value as buyers are more plentiful. In reverse, values decline when buyers aren’t around.

Internal Appearance

Outdated kitchens and baths, old appliances, patio or driveway cement that is cracked, extensive clutter, and a long maintenance list devalue a home. Add in a roof that’s in bad condition, and an air conditioning system that’s old, no home warranties and the lack of a garage, and your home’s value is dragged down. Planning for a new look for your house? Look no further!  MJS Construction Group  is here to help in your home builders.

The Economy Can Impact the Value of Your Home.

The economy is one factor that causes property values to decrease. As a general rule of thumb, a struggling local economy that doesn’t have a stable job market can reduce home values.

The national economy can also cause reduce property values. For example, the 2007 recession caused a sharp drop in home values across the country.

Increasing Mortgage Rates

When mortgage interest rates are low, buyers can afford to spend more on the house. Their monthly mortgage payments will be lower at lower interest rates, and they will pay less over the loan’s life.

As interest rates increase, home affordability decreases for potential buyers. They can’t afford to spend as much on the initial purchase price because, with the increased interest rates, their monthly mortgage payments will be higher, and they will have to pay more over the life of the loan.

Mortgage rate increases not only affect home buyers, but they affect sellers as well. Your home is not as valuable because people have to pay more to buy your home at higher rates. Before the interest rates rose, your home may have been in the price range of 30 prospective buyers. With the higher rates, this number may have decreased to only 10 prospective buyers.

You may have a more challenging time selling your home at the current list price. You may have to drop your list price to appeal to more buyers.

Understanding the Negative Impacts of Environmental Concerns

According to a recent University of California at Berkeley study, constructing a power plant within two miles of a home can reduce the value by as much as seven per cent. Other environmental factors that can reduce the value of a home include:

  • Proximity to landfills
  • Changes to the flood zone maps that place your home within an active flood zone
  • The construction of nearby busy roads with a higher speed limit
  • Recent floods, earthquakes, hurricanes, wildfires, mudslides, tornadoes, or other natural disasters

Natural disasters can not only threaten your property, but they can also negatively impact your local community for years after the event.

For example, a hurricane might alter the flood zones, making your home more susceptible to flooding. Potential buyers might be cautious about purchasing a home in the new flood zone and requiring flood insurance.

house dual occupancy

Can Surrounding Homes Cause My Property Values to Decrease?

Appraisers typically use recent transactions on similar neighbourhood homes to assess the value of your property. Unfortunately, if surrounding homes are appraised at significantly higher values, then your home can look less valuable by comparison.

Conversely, if the surrounding homes are priced too low, then they can cause your property value to decrease as well. Finally, the value of your perfectly maintained home can still decrease if the local neighbourhood is filled with eyesores.

Costly Repairs and Needed Updates can Reduce the Value of Your Home.

Does your home need a new roof? Is your HVAC unit out of date? Do you have a long list of in-home repairs that seems to grow longer by the minute?

If your home needs costly repairs and updates, then its value will decrease over time. Fortunately, you can reverse the downward trend by completing the necessary repairs and upgrades.

Local Foreclosures and Short Sales can Lower Property Values

If your neighbourhood has a surplus of foreclosures or short sales, then the fair market value of your home will decrease. The presence of foreclosures or short sales can make many prospective buyers hesitant about purchasing the perfect house on the block.

With this in mind, foreclosures are a typical sign of market instability. An unstable market often causes property values to decrease.

How Your Neighbors Affect Your Property Value? 

What you should look out for

There are signs to look out to determine the direction in which the home’s value will head in the future. Although external obsolescence can have a negative impact on your home, it can be temporary things, so it’s essential to do a little research.

Physical factors

This point can seem obvious, but sometimes it’s overlooked because you may consider it to be an easy fix. For example, a neighbor’s unkempt lawn can harm your home. The simple solution is to clean it up, add some easy curb appeal, etc. This could be a temporary factor in reducing your home’s value, but if this neighbour has a regularly unkempt lawn, then it may not be so temporary. Some lawns can be in complete disrepair, and the closer these properties are to your home, the more severe the impact it has on your home’s value. For whatever reason the neighbour is unable to clean up their property, whether they don’t have the time or finances, the risk is that it could decrease your home’s value. The more neighbours you have that have the same problem, the more impact it will have on surrounding homes and your property, ultimately affecting the property values of an entire neighbourhood. Thankfully, many neighbourhoods have HOA guidelines that each homeowner has to follow. This can guide homeowners in picking an exterior door colour to allow only a certain number of cars to be kept on your property. You can report an irresponsible neighbour to the local HOA, and they’ll handle the situation from there.

Financial factors

If a neighbour has severe financial issues, then an unkempt lawn may be the least cause of concern. A significant impact on your home value would be a nearby foreclosure. A study by the New York Times saw a 1.3% drop in home values of homes within 300-500 feet of a foreclosed home. The impact can be even more significant if the foreclosed home is also in physical disrepair. Suppose you live in a condo, for example. In that case, neighbours who don’t pay maintenance fees can impact your unit’s value and the rest of the building because of a lack of desirability of living there by potential homebuyers. Although a foreclosure could have a severe impact on home values, it doesn’t necessarily mean it’s permanent. It’s possible to see things turnaround when you ride it out and wait until the bank or lender sells the home to a new homebuyer.

Ultimately, unsightly yards and foreclosures affect your home’s resale value because they bring down the neighbourhood’s average home values. MJS Construction Group has the best range of home builders Melbourne services to help you create your dream house.

Legal factors

It’s essential to research criminal neighbours as well because a registered criminal or someone engaging in illegal activity could potentially put a dent in your home’s value by 10%. Most communities share lists of homeowners with criminal backgrounds, which you can access when looking into different neighbourhoods. Other factors aside from the ones listed above could also potentially impact your purchase choices or selling abilities, such as neighbour’s behaviour. For example, if a neighbour is disruptive and throws loud parties all the time, this could have a negative impact on your neighbourhood. There’s no good natural way of knowing about these factors when looking for a home, though, since you don’t live there yet. But you can ask the current homeowners of the house about neighbours. Although they may likely outline the positives, you can gauge how positive you see those factors being off your own past experiences or opinion. 

As you can see, some factors can decrease the value of a home. It is essential to consult with a local real estate agent to determine exactly how much. Be sure you understand how your appreciation rate will change with one of these problems in proximity to your home. Far too many people do not realize the impact of external forces on real estate values.

There are certainly plenty of things you can do to your home to increase its value, whether it’s refacing your kitchen cabinets, refinishing your driveway, or lathering on a new coat of paint. But some things may be out of your control. If you plan to sell some time soon, be sure to enlist the help of a seasoned real estate agent who can help guide you to ensure you get the highest price tag for your home.

Google Rating
Based on 24 reviews
Scroll to Top