Today, not just investors but even end-users check for property price appreciation potential before buying a home. Check out how prices work across all posh colonies of South Delhi here. We list the 5 important factors that cause property prices to appreciate.
Real estate investors are always keen to buy a property when they know that it will gain in capital appreciation but it is not only property investors who are attracted by this phenomenon. There is also greater interest from end-users for buying rather than renting homes, since real estate appreciation means that their asset becomes a greater source of financial security going forward. Appreciation also opens up the possibility of selling the first property and buying a bigger and better one should the need arise, which usually does as the family grows.
Factors that cause property prices to appreciate
So, what is it that makes residential property prices increase in some locations? The phenomenon of capital value appreciation or growth of a property’s market value over time happens because of various factors, including:
1. Demand and supply
When there is increasing demand for homes in a certain area, property prices go up if the amount of residential real estate projects being built to meet the demand is not catching up fast enough. In other words, people buying homes for their own use (end-users) are willing to pay more for a home because living in that area is attractive and desirable. End-user demand also attracts the attention of real estate investors, who purchase residential properties with the view of putting them on the market again when supply in the location reduces and prices consequently increase further.
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2. Fiscal inflation
Inflation is caused by excess money being in circulation, which essentially causes the value of money to reduce. When this happens, the prices for several input items like the cost of land, construction materials, construction labour and statutory building permits, also increase. Of course, inflation will not result in increased property prices in an area if the location itself is deficient – meaning that it has poor accessibility and social and civic infrastructure, or if it has seen an oversupply of residential projects already.
3. Interest Rates
The level of interest rate is one of the major factors that affect property value. If the Reserve Bank decides to increase the interest on loans, lenders will follow suit. This will mean that borrowers will have to pay a higher monthly mortgage repayment. Expensive mortgages mean that properties will be sold at a higher price. On the other hand, a reduction in interest rates means that property will be more affordable.
4. Property market drivers
With specific pertinence to residential real estate, the term ‘market drivers’ refers to all and any developments in an area that positively impact the desirability and convenience of living there. These can include:
- The development of new office complexes in the area.
- The proximity of educational institutes and hospitals which reduce traveling time to such important establishments.
- Zoning regulations in an area that prevent excessive development from happening to cause further densification, thereby, preserving the available open spaces, greenery and overall ambience of the location. This is particularly true in integrated townships.
- Public transport facilities which ensure that the location is accessible by road, rail or even air.
- Any new infrastructure projects which boost the overall quality of living in the location, such as flyovers to reduce traffic congestion, water reservoirs, etc.
5. Home Size and Usable Space
The market value of a property is usually mentioned in terms of price per square foot – the total sales price divided by the property’s square footage. Besides square feet, a property’s value is determined by the usable space. Garages, unfinished basements, and attics are usually not included in usable square footage. It is spaces such as bathrooms and bedrooms that can significantly increase the home value.
Conclusion
It is important to know what a property is worth before buying or selling. Though available online tools take into account factors that affect property value such as recent real estate market trends, real estate comps and interest rates. There are lot of other variable factors that you need to look at to get an accurate idea of the property’s value. This is why you should work with professional real estate agents like SouthDelhiPrime who have some experience with property valuation and appraisal in the South Delhi. Talk to our South Delhi real estate experts today.
Southdelhiprime.com a Digital Venture of SanD Advisory Pvt Ltd. is a boutique real estate advisory & transaction company, having advised the who’s who of South Delhi on their real estate assets. We have special expertise in high value transactions & dispositions in South & Central Delhi. With over 500+ clients, SanD has done transactions worth millions. DoctorProperty.in, our online expert will respond to some of the common questions we’re receiving regarding buying a house during this pandemic.
