View
I periodically ask, what have I changed my mind on recently? Last month, the answer was simple: a view — a view from home and its value. As an adult, I have never had much of a view from home, which has resulted in me undervaluing it.
We moved to a new place in April and now have a good view. Within a few weeks, I learned to appreciate the elevation and the view. Seeing over the rooftops of neighbouring buildings and even glimpses of the sea has completely flipped my perception of a view’s value. Before, even when buying the new apartment, I gave no value to a view. When evaluating an apartment, I solely focused on the location, floor plan, space, price, and features. I had zero consideration for the view. As of today, I would be willing to pay 10-15% more to have a great view over a basic one.1
I wondered if this was a semi-hidden insight or if I had missed the obvious? As one of the businesses I am involved in focuses on real estate, have I completely missed a factor in my apartment value evaluations? Would renters pay more for an apartment with a view? If there are two identical apartments, one lacking a view and another with a stunning view, what would be the additional rent generated by the excellent view?
My hypothesis is that a great view does not significantly increase achievable rents. However, it increases apartment value by lowering costs and risks. The main cost-saver is lower tenant turnover frequency. A great view may lenghten the average tenancy, leading to fewer turnovers and lower costs. A great view provides a competitive advantage against similar apartments without a view, which may result in shorter vacancies due to faster leasing. Apartment with a great view is also likely to sell faster than a comparable viewless apartment, which increases the portfolio liquidity, providing downside protection.
It was a good reminder that sometimes I must experience a thing to notice its value. After discovering the value of a view, I wonder what other things I overlook because I have not experienced them?
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My definition of a “basic view” is overseeing a street or another building. “Great view” would mean either a senic view of nature (water, forest, mountains, etc.), a cityscape view (looking over the city), or an “urban oasis” (lush, green cityscape). ↩︎