Post by Chuck Braxton, REALTOR® GRI, Roche Realty Group, Inc.
A few years ago, I met with the owner of a home with a lake and mountain view who said, “I think I know what my house is worth, but what I want to know is, what is that view worth?” That started my interest in quantifying and defining the value of a view, an issue that many would say is heavily subjective.
This article is prepared for buyers and sellers of real estate in the Lakes & Mountains Region of New Hampshire who are interested in having a property with a view or who are evaluating the merits of the scenery at their property. Also, although this article is not intended to be a discussion of “the view tax”, it will touch on the issue. Surprisingly, the idea that a view affects the value of real property is not recognized by all parts of the real estate industry in New Hampshire. One instructor of real estate agents (and former appraiser and real estate broker) stated that a view has absolutely no impact on the value of a residential property. Most real estate appraisers are also hesitant to assign a large premium to the value of the property based on the quality of the view. On the other hand, at least one appraisal firm, Avitar Associates of New England, has developed standards and multipliers for its clients for determining the additional value of a lot based on its view. Their work suggests multiplying the value of a building lot by as much as a factor of six to bring the value of a view parcel in line. Avitar performs property tax assessments for several towns in the Lakes & Mountains Region such as Alexandria, Hebron, Ossipee, Sandwich, Thornton, and Waterville Valley.
Buyer behavior suggests that, all other things being equal, the quality of the view does matter and is a factor in what people are willing to pay. This article will examine what those “other things” are as these things
can offset any view premium. First, let’s take a look at the factors affecting the value of the view.
While the focus of this article is on non-waterfront properties, we can learn from waterfront properties where there is a premium for the “Big View.” The Big View has the following characteristics: an uncluttered foreground with no view of others’ waterfront facilities or their homes; the view is large in terms of width or breadth, depth or distance, and a sense of elevation such as mountains and valleys. Moving away from waterfront properties, buyers still value these characteristics. In fact, as the prices of waterfront homes have reached a level that is out of reach of many buyers, having a suitable view has become the most soughtafter amenity in the Lakes & Mountains Region.
The Number One request among buyers of all property is a year-round water view. Why? The water surface enhances all dimensions of the view and provides a tableau that changes with the weather and the angle of the sun. Thus, a distant glimpse of a lake or water body is not nearly as valuable as a water surface in the foreor
mid-ground. The most valuable view is not just a view of water but rather a view over water. Keep in mind that even water bodies that offer few recreational opportunities such as wetlands or rivers can provide excellent viewscapes.
Though buyers may not recognize it at first, a view over fields or pastures can be as desirable as over an expanse of water. Creating movement and enhancing all dimensions of the view with changes in light, weather and seasons, fields and their stone walls can offer the same visual characteristics for a view that a water body provides.
From these five basic factors others come into play in adding value to a view. The exposure of the property, that is its orientation to the sun when looking at the view, is important. Of course, sunset and sunrise views are sought after, but an equally important aspect of exposure is how the changing angle of the sunlight enhances the view. A southerly exposure may not offer as much change in the texture of the scenery from morning to evening as say, a northern exposure around easterly to the southeast where dramatic changes will occur throughout the day. For example a southeasterly exposure will have dramatic full moon perspectives in the early evening. Add a view over water or a field and you have a shining moonlit path at your feet every four weeks.
It also turns out that the best views are framed and that foreground screening can enhance a view. Framing may be created by the natural landscape such as an escarpment, valley, or slope, or by vegetation. Framing creates a sense of depth and scale for the view and draws the viewer into the perspective while focusing the viewer’s attention. Foreground screening may involve scattered large tree trunks in the line of sight that further enhance depth perspective and intrigue of the view. Screening seems to contradict the value of an uncluttered foreground, but clutter arises from inharmonious man-made features and colors intruding on the view. However, when screening is artfully employed, it can add a seductive “nude through the veil” effect to the view. Thoughtful placement and design of windows, decks, and other features in the home can also create framing and screening architecturally.
Next are the overall composition in the foreground, mid-ground, and background and how the view is aligned as seen from a home on the property. The view needs to be visible from many places, but need not be centered.
A view that brings together all of these factors—scale, water or fields, exposure, framing and screening, composition and alignment—may still disappoint. The best views have something else working for them. It is the surprise-and delight of observing human activity in a larger natural landscape—“the oriental scroll effect”—since this artform often depicts a grand landscape as a setting for miniature-scale human activity. This effect encourages the viewer to linger and explore the view. Ideally, the human activities should be seen, but not heard. Local examples include the MV Mt. Washington moving among the islands of Lake Winnipesaukee, smoke rising from the cog railway on Mt. Washington, boat traffic or ice fishing on a water body, looking down on small aircraft making their approaches to an airfield, or even
an occasional vehicle moving along a distant shoreline road on Winona Lake.
As buyers have sought views, the prices of undeveloped view parcels have been bid up. Towns have taken note of this in their property tax assessments. Thus, as valuations rise based on recent sales of similar parcels, some erroneously refer to this as a ‘view tax.’ In fact, values are based on the appraisal principle of “fair market value” or what buyers are willing to pay. Mechanisms such as ‘current use’ are available to mitigate the impact of higher assessments on larger undeveloped tracts that have a view so that current residents are not priced out of their homes.
Now let’s take a look at those “other things” that need to be equal. Once a home is built, the value of the view based on these factors may increase, remain the same, or decrease. Development of view properties in the Lakes Region began in the 1970’s and peaked in the late 1980’s. Thereafter, real estate prices fell encouraging more development of view properties in the early 1990’s. Prices for undeveloped land rose sharply in late 2003 and now have reached a level that is two to four times prices seen before 2003. These historical patterns affect view properties in several ways.
Buyers’ expectations have changed. Today, buyers want to enjoy their view from first thing in the morning until the last moment at night. The gold standard is a view from every room except bathrooms other than the master bath, but few properties meet this. Some homes built from the 1970s to as late as the early 1990’s do not have views from the master suite or other living areas such as the kitchen or dining room or have layouts that interfere with orienting furniture in the living areas to take advantage of the view.
“Privacy” is another factor that has become more important to buyers today. Using lot size as a proxy for privacy, many buyers tend to seek out parcels of five or more acres and consider smaller tracts to be less desirable. However, the actual sense of privacy afforded by a view parcel will depend on the proximity of the building site to other homes.
Because development occurred later and values have not appreciated as sharply, the ‘tear down’ phenomenon seen at waterfront lots has not reached view parcels. In fact, undeveloped view parcels in a subdivision can price themselves out of the market (for a discussion of this phenomenon, see Owning an Undeveloped Lot in a Subdivision: Going for Gold or Holding the Bag? by the author, available upon request). Since view properties tend to trade within a certain price range for a given area, the predominant value of developed real estate with views in the surrounding area affect the value of other view properties as they come on the market.
A view parcel that is comparably developed may have a similar value; however, a property with fewer improvements or in need of updating may have a lower view premium for a couple of reasons. First, today’s construction costs are dramatically higher than the cost of existing homes so bringing a property to a comparable level of improvement will be costly. Secondly, a lender’s appraisal of the property may not support the higher value at the property that is lacking improvements. Situations like this can present opportunities for buyers who have the vision and resources to implement improvements to capture the full view premium at a property.
All other things being equal, sellers should keep in mind that their property will compete primarily on the quality of its view based on these factors. An experienced real estate professional can review the selection of view properties available to buyers and assist the seller in positioning their property to compete effectively for buyers’ attention.
Finally, sellers of view properties should consider how their property meets the wants and needs of today’s buyers. Professional real estate guidance can determine how a property compares with features sought by various buyer segments. Predominantly, buyers of view properties are: (i) families with/without children at home who are buying for the next chapter of their lives, (ii) families perhaps with children at home whose work permits telecommuting, and (iii) families seeking a second home for relaxation and recreational enjoyment with a 5-10+ year time horizon.
About the Author: Chuck Braxton is a REALTOR® with the Meredith office of Roche Realty Group, Inc. He has applied his 25+ years of experience as a business executive to the challenges facing sellers and buyers of real estate in the Lakes & Mountains Region. Mr. Braxton has authored several articles and financial models on valuation for project development and real estate applications. In addition, to this article, current works include Owning an Undeveloped Lot in a Subdivision—Going for Gold or Holding the Bag? and Valuation Model for Water Access Properties in the Lakes Region of New Hampshire and a series on waterfront, water access and vintage property values. His website is www.ChuckBraxton.com . Mr. Braxton may be reached at 603/677-2154 or toll-free at 800/926-5253 ext. 342 any time of day or evening, or by email at firstname.lastname@example.org.