Real estate investment is one of the ways of creating wealth around the world. Many people invest in real estate to earn profit while others are simply looking for a home to live in. Real estate investors are always keen to buy a property that will gain in capital appreciation. Most middle class families decide to invest in their residential homes, hence real estate is the largest investment in the portfolio of families across the world. Appreciation in a property’s value can be caused by factors like increasing demand, inflation and improvements to the property. Over a period of time properties have increased in value.
Real estate appreciation means that assets become a greater source of financial security going forward. Whether you are selling or buying an investment property, it is essential to consider the real worth of the property. Land appreciates due to the fact that it is limited in supply. The increase in price of land over time is attributed to the high demand of land as the population grows. From demand and supply through to facilities, location, aesthetics and planned infrastructure, there are numerous factors that influence property value.
The location of property usually determines and affects how much a property is worth. Many people prefer living in places near their areas of work and close proximity to cities or town areas. The properties in urban areas are more expensive due to high demand that drives the prices for rental housing units. Security, availability of amenities and infrastructural development are attractive to potential homeowners, hence properties can differ substantially in value if they are located in different areas.
Many potential homebuyers are drawn to areas with development of new infrastructures like schools, hospitals, shopping malls and transport facilities in the area. If changes in infrastructure development are continuous, the price of the land will keep increasing. Properties with the availability of amenities such as water access, electricity and security are priced higher than other properties.
Interest rates have a major impact on real estate markets, thus influencing a buyer’s ability to purchase property. The rate of home ownership can be influenced through low interest on mortgage loans as loans become cheaper. High demand for properties results in the increase of property prices. The value of property can be affected when the Reserve Bank changes monetary policy. If mortgage repayments increase it will have a huge impact on property affordability, therefore creating less competition in the real estate market as prices lower. Income growth, unemployment, GDP of the economy are factors that affect house prices and impact the real estate market.
Properties become expensive to a developer each year as inflation costs increase the price of building inputs like cement, steel and skilled labor as they tend to increase every year. Therefore, general inflation makes properties more expensive. If the nominal price of the property is not increasing by 2 percent to 3 percent every year, it means the property owner is actually losing money in real terms. This can be because the inflation is increasing while the price of the property is not.
Supply and demand
If demand exceeds supply in a real estate market, hence property prices increase. This is because of the increasing growth in population that is higher than the supply, thus owning property increases in price.
Aesthetics and investment potential
The curb appeal of a property should never be underestimated. In real estate first impressions are very important. The interior and exterior of the property can significantly increase or decrease the value of the property. The value of property is also influenced by the potential it presents to the investors. An investor can expect rental income and capital growth from a property.
Investors should consider how land appreciation can offset the depreciation of a property. A developer can implement smart interventions that can increase the value of a property. It is wise for an investor to observe market trends, as this can help increase the property’s value and meet the demands in the real estate sector. Technological advancement and modernising the structure to the current market standards will help an investor or developer gain profit. This will also enable them to build their market investment portfolio and assist in gaining more returns in the real estate market.
You need to understand the real estate market in order to get an accurate evaluation of the property’s value. With this in mind, the best way to work out the value of your property is to enlist the services of an agent or through a property firm who can provide a professional valuation. For a buyer working with a real estate agent like Commercial Property Kenya will go a long way in making sure you are guaranteed of property value increment. This is because real estate agents are familiar with the market and are aware of the possible trends in the market.