What is a Good View Worth in Real Estate?

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It’s often said that a view like this is “worth a million dollars”. Image: © K. Marius

If you travel to a tropical country and stay in a high-rise resort hotel, it’s quite common to find that room rates vary depending on the type of view that there is from the room. Ocean view rooms are higher in price than mountain view rooms, and those in turn are higher in price than city view rooms.

It’s the same in real estate. If you are looking to buy a home or a lot with views, then you can expect to pay more than one without views. So how much is a view worth in real estate terms? Of course, what makes a good view is subjective. To some a view of the ocean with crashing waves is worth a big premium, but to others a relaxing view of green mountains may be worth more.

And whether a view is partially blocked by trees – or could be in the future – and whether the location of the property makes it liable to be blocked by a new building in the future, are other factors that have to be taken into account in determining how “good” a view currently is and will be in the future.

About 25 years ago, a couple of American researchers did an extensive academic study into how much a “good view” was worth based on property appraisals of single dwelling houses over a 5-year period. They concluded a good view added about eight percent to the value of a house.

These days property appraisers generally add around 10-12 percent for a good view, but these are conservative figures, just as property appraisals tend to be – especially if they are being undertaken for banks in response to lending requests from potential buyers.

There is also an approach in scientific analysis called the “Fuzzy Delphi method” which is a method of assessing the differing opinions of experts on a particular subject, and in a study of real estate values it was found that properties with unpleasant views (such as cemeteries or factories) sold for up to 25 percent less than similar properties with no views, but those with water or rural views sold for up to 50 percent more.

Michael Yarnley, a well-known Australian property investment adviser is even more bullish claiming that unobstructed ocean views can add a premium of up to 80 percent.  That’s very much at the top end of the scale of estimates and would most likely only apply to upmarket properties in exclusive locations with multi-million-dollar price tags.

Most real estate sales agents say that for unobstructed 180-degree ocean views, the asking price of the property would generally be around 30-35 percent high than a similar property without views. Of course, whether the seller will get that premium is entirely dependent on how the buyer values views, but some buyers – especially retirees – are only interested in buying properties with views.

Mountain views are usually at a slightly lesser premium than ocean views, and city views below that – depending on how attractive the city is. In some locations, views of both the ocean and mountains might be available in different directions — something that would be regarded as the best of both worlds. Lake, river and rural views can attract good premiums too. The amount of those premiums will be dependent on the nature and extent of the views.

Many tropical countries are mountainous, and many lots around coastal cities are elevated. These lots are more valuable not only because of their views but because they catch the ocean or mountain breezes better, thus reducing the cost of cooling the home.

Apartments and town houses on hillsides or near beaches will generally cost about $10,000 more per floor as you go higher and enjoy more extensive views. That’s a pricing premium that’s usually built into what developers sell units for when new, and that premium is usually carried forward into resale prices provided views don’t get blocked as the properties age.

Despite all the studies and expert opinions though, in the end it all comes down to what premium you as the buyer are prepared to pay for the enjoyment of having a good view from your new home and how much time you will have to enjoy it. And, of course, whether the seller is prepared to sell for that price.

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