The Analysis Of A City
As was noted in the Principles of Property Valuation section for supply and demand: Physical, Economic, Government and Social (PEGS) are the four forces that will influence demand. Just as PEGS affects the value of a particular property, it also affects the value and appeal of a city or neighborhood.
P = Physical Boundaries
E = Economic Activity
G = Government
S = Sociological Characteristics
- 1. Physical Boundaries - this refers to lakes, rivers, mountains, etc. that are some type of a divider between cities and/or neighborhoods. This does not mean that you just use the city boundaries listed on a map for an appraisal report. The boundaries that are on a map may be different from the actual physical boundaries of the area. Also, just because a street has heavy traffic, it doesn't make it a boundary for the neighborhood. When you do use a street as a boundary, you technically use the properties up to 1/2 of one side of the street, on either side, as the boundary for the neighborhood. Also, look at price ranges and incomes as possible boundaries to use for your appraisal reports.
- 2. Economic Activity - this refers to the dominant economic activity of a city and/or neighborhood. Some examples of the different types found are: the nice areas of the city with the expensive homes and/or apartments, the expensive retail areas, the low income residential areas, the heavy industrial areas, transportation that's available in an area, such as, airports, bus terminals, railroad, etc.
- Linkages - this refers to easy access to highways, job opportunities and employment centers, etc. of a neighborhood. Driving time is important for linkage with the supporting facilities for the subject property. Supporting Facilities and Services refers to hospitals, shopping centers, schools, recreational facilities, etc. to service the neighborhood. All of these will have an affect on the values of real estate in an area.
- 3. Government - this refers to the jurisdiction and stability of the government, tax structure, building department regulations, zoning, etc. that is found in cities. Are the building department regulations and zoning very strict? This could limit a typical home buyer from building an addition to a house or garage, etc. All of which must be considered in estimating the market values of homes in that area for an appraisal.
- 4. Sociological Characteristics - this refers to the quality of the schools and recreational facilities, diversity of the churches, culture, arts and theaters, etc. that are found in cities. The more diversity and appealing these are, then the higher the property values will be due to increased buyer demand.