December 1st, Author: Varma
Checking for price appreciation potential prior to buying a home is a healthy practice before you invest your hard-earned money in a real estate property. As such, property investors are always keen to buy properties they know will gain capital appreciation, but they are not the only ones attracted to this phenomenon.
Nowadays end-users are also showing interest since the price appreciation potential means that it becomes a great source of financial security in the future, converting the real estate property into a major asset. Moreover, real estate appreciation also opens up the possibility of selling the property at a better price to buy another which is bigger & better, should there any need arise with the growth of the family or for the scope of further investment.
Factors Causing Property Prices to Appreciate
What exactly is it that residential property prices increase rapidly in some locations and slow in some other?
Growth of property’s market value over time or the phenomenon of capital value appreciation happens because of several factors. Supply & demand dynamics of a particular location play a major part. Fiscal inflation, interest rates charged by banks on home loans & development of new infrastructure in the area also factors affecting the price appreciation potential of a real estate property. Other key market drivers include close proximity to conveniences such as airport, schools, shopping malls, availability of public transport within the area, etc. Growth in the local population of the area will also lead to an increase in demand.
Demand & Supply Chain
Property prices will go up whenever there is an increasing demand for homes in a certain area, in case residential real estate projects are unable to catch up. Therefore end-users are willing to pay more for homes in living areas that are attractive & desirable. However, an ideal opportunity for end-user homebuyers in areas with high appreciation potential is the time when investor activity has not yet started in earnest.
Bank Interest Rates on Home Loan
Downward or upward movement of home loan interest rates directly correlates to the price appreciation of a real estate property. Demand for homes slows down whenever the cost of borrowing increases as fewer buyers can afford higher EMIs. Similarly, affordability increases & market sentiment improves when home loan interest rates decrease & thereby leading to high demand for residential property purchases.
Developments in the Region
Developments, particularly infrastructural, are market drivers which refer to any developments within the area which positively impact convenience & desirability of living. For example, the development of newer office complexes & the arrival of a shopping mall close by affects appreciation of your property.
Proximity to educational institutions and hospitals also contribute to appreciation as they reduce traveling time and are much more convenient.
Zoning regulations in the area effectively prevent excessive development which can cause further densification. It can preserve greenery, available open spaces & overall ambiance of the area.
New flyovers, access to ring roads, public transport facilities & any new infrastructure projects also boost the overall quality of living in a particular location.
Local Population Growth
It’s quite obvious that growth in the local population results in increasing demand for housing in a particular area or town. An increase in demand for housing directly translates into an appreciation of your property prices.
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