For decades, property professionals have relied on a simple mantra: location, location, location. But is it still the biggest driver of value in residential investment?
Higher borrowing costs, changing tenant expectations, new legislation and closer scrutiny from lenders mean valuation is no longer as simple as finding the right postcode. For investors, portfolio landlords and developers looking to buy, refinance, sell or improve their assets, it pays to understand what really drives value.
We sat down with Katherine Nolan, Director and Head of Valuation at Centrick, to talk about what’s affecting values today and what investors should focus on over the next 12 months.
Is location still the biggest driver of value?
Kat: It’s still incredibly important, but I don’t think it’s the whole story anymore.
Location will always have a major influence on value, but today’s market is much more nuanced. The wider economy, borrowing costs, tenant demand, asset quality and operational performance can all affect value. You can have a property in a strong location, but if there are issues with income, compliance or condition, that will be reflected in the valuation.
Investors need to think about how all of these factors work together, rather than focusing on one in isolation.
How is market confidence affecting values right now?
Kat: Quite a lot, even when the property itself is performing well.
Property doesn’t sit in a bubble. Interest rates, lending conditions and wider economic sentiment all influence investor behaviour. When confidence is strong, transactions tend to increase. When there’s uncertainty, buyers become more selective and lenders more cautious.
At the moment, we’re seeing pressure on loan-to-value ratios, alongside larger discounts on assets that need to sell quickly. That has a direct impact on achievable values and the options open to owners.
How important is income when assessing value?
Kat: Income remains one of the biggest drivers of value, particularly for investment property.
Investors want certainty, so we look closely at occupancy, rental performance and the strength of the income being generated. A fully let property with reliable tenants will generally be viewed more favourably than one with vacant units or uncertainty around future income.
Legislation is playing a bigger part too. The Renters’ Rights Act has changed how residential tenancies work. It brings in new rules on rent increases and on fixing hazards promptly, so investors need to understand how that affects both the security and growth of their income.
It’s not simply about the rent a property generates today. It’s about how sustainable that income is likely to be tomorrow.
What makes a location attractive in today’s market?
Kat: Investors are increasingly looking beyond traditional hotspots.
We’re seeing growing interest in areas with strong regeneration plans, infrastructure investment, better transport links and good local jobs. These can have a big impact on future performance and investor appetite.
Location also means different things depending on the type of asset. Understanding how a local market is expected to change is often just as important as knowing where it sits on a map.
Why is asset quality becoming more important?
Kat: Buyers and lenders are asking far more questions about asset quality than they were five years ago.
We’re seeing much greater scrutiny of building condition, Energy Performance Certificate (EPC) ratings and compliance. Investors want to know not just what a property is worth today, but whether it’s likely to need significant spending in the near future.
For units within multi-occupied buildings, investors also need to carefully review lease costs such as ground rent and the service charge arrangement, as well as planned maintenance and upcoming compliance costs.
Can good asset management actually affect value?
Kat: Without question.
Operational performance is often overlooked as a driver of value, but effective management makes a real difference over time. High occupancy, strong tenant retention, robust compliance, clear reporting and good cost control all make a property more attractive to investors and lenders.
The best-performing assets are usually the ones where owners take an active approach rather than a passive one. Strong asset management supports income, reduces risk and helps protect long-term value.
What should investors focus on over the next 12 months?
Kat: Take a step back and look at the bigger picture.
It’s getting harder to assume property values will simply rise over time. The investors who keep performing well are those who actively manage their portfolios, review lease positions, keep on top of compliance and look for ways to improve income and occupancy.
Location still matters, of course, but it should be weighed up alongside everything else. Understanding your asset, your tenants and your market is what lets you make informed decisions.
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