I could now describe in a general consulting manner what real estate buyers want so that you’d know as an investor or developer and builder what to include in a property.
There is just a small problem. Is that even the right question to ask?
Should the question for an investor or builder not rather be how to make buyers pay premiums and feel good doing it?
Today I will give you two lists.
In one list I will give you the standard answer – what buyers want.
And in the other list I will give you an answer by which you can motivate real estate buyers in a way that they’ll want to pay premium prices for real estate.
The Standard Tips You Usually Find:
- Laundry room
- Well-manicured illuminated lawn with exterior lightning
- Energy efficient windows
- Ceiling fans
- Concrete patio
- Hardwood floors
- Garage storage space
- Eat-in kitchen
How to Make Them Want to Pay Premiums for It
This gives us the first big hint of what buyers seem to want.
At this point I could end the article by saying “they want wellness real estate and healthy homes” and call it a day.
But this would be disappointing for you and for me. And there is some more in-depth market information about the features they want and how much more they pay.
A lot of this data were collected by the Global Wellness Institute from a review of more than 220 independent academic peer-reviewed studies.
In these documents they found proof that homebuyers would pay between 5% and 20% premiums for built environment features that improve their wellness.
The 5 features that motivate price premiums
1. Easy access and proximity to high-quality natural and recreational amenities
Greenbelts, nearby open spaces, and conservation areas can attract home price premiums of 3-12%.
Nearby multiuse trails and parks can attract a premium of 4-20%.
And recreational amenities and programming within the community such as fitness centers, golf courses, and swimming pools can rack up premiums of 5-15%.
As a developer you surely can’t just use an extra 2-square-feet area of the property where there would barely be enough space for a dog, throw some grass on it, and call it a park to get the premiums.
Or use an aquarium and call it a pool.
The height of a premium you can attain from these amenities depends on quality, characteristics, and the distance from the home.
2. New Urbanist features
New urbanist features are of higher density, mixed use, transit-oriented, and traditional neighborhood design.
The first three features might be self-explanatory.
But not everyone knows what is meant by “traditional neighborhood design”.
According to Wikipedia a neighborhood should have a range of housing types, human public spaces, a network of well-connected streets and blocks, and amenities such as schools, stores, and places of worship within walking distance of residences.
Traditional neighborhood design usually limits itself to the scale of neighborhood or town.
According to the market data these communities offering health-enhancing communities managed to attain home price premiums of 5-20%.
3. Neighborhood Walkability
If you manage to increase walkability to above-average in a neighborhood or private community, you may achieve $4,000 to $34,000 premiums for homes that can offer that.
In other words, for every one-point increase in a neighborhood walkability score you can expect a 1% increase in home prices.
4. Healthy Home Features
Sustainable design has been around longer than healthy home design.
An interesting fact is that surveys from China and India to the United States and United Kingdom signal that there is a strong consumer demand for such features and a willingness to pay more for them.
As a short excerpt from my article about healthy home standards and specifically the living building standard I’ll give you some examples of healthy home features:
- Civilized environment such as operable windows providing access to daylight and fresh air have to be provided in each occupied space.
- A healthy interior environment such as indoor air quality tracking, exhaust systems for kitchens, bathrooms, and janitorial areas, cleaning products in compliance with the EPA Design for the Environment Label
- Biophilic environmental features such as light, space, natural shapes and forms.
- No use of certain building materials such as asbestos, cadmium, bisphenol A, etc.
5. Sustainability Features
If as an investor or developer you build homes with green certification labels and energy-efficient features, you can achieve sales premiums of 1-10% around the world.
This is what the market data indicate over the last 10-15 years.
Market analysis and data suggest that real estate buyers currently want more and more environment features that improve their wellness and would pay between 5%-20% premiums for them.
From the investors’ and developers’ point of view this is good news.
My article about healthy home building standards ended with an open question, whether the extra costs of implementing certain and partially very thorough standards make an investment even worth-while.
I lean more and more towards a ‘yes’, since on one hand you can achieve premium prices on the market and on the other hand you may not always need to follow the for example very thorough living building standard to the letter.
You can also use different standards as orientation or inspiration from where you can pull ideas and elements like tools from a toolbox.
At the end you will need to find the middle ground between wellness real estate or healthy built environment features and the willingness of real estate buyers to pay premiums for them, so that everybody can achieve a profit from the real estate deal creating win-wins for everyone participating in the deal.
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