Nothing just happens. The desire to know what will or could happen in the future is one of the age old curiosities that have refused to leave the mind of men. It is this desire that has led to the creation of various charts and models that seek to anticipate market trends and opportunities. The real estate sector is no different. There are factors that affect the value of properties negatively or positively and a good investor will do well to understand these factors. A basic factor that determines the value of real estate is the law of demand and supply. In simple terms, the higher the demand and the lesser the supply, value will increase. However, this works in various ways when applied to real estate. The value of a specific area can begin to increase as a result of infrastructural development, for instance. The pressure on such an area then causes the value of real estate in such an area to increase. Combined with other factors, the value could reach a point where only investors with deep pockets could afford it and then people and businesses begin to explore nearby alternatives that cost less. This trend then causes the value of the now high end area to slow down in appreciation and then begins to push upwards the value of the alternative areas. In addition, government policies and programmes could affect the law of demand and supply negatively or positively. Whenever the government, in a bid to increase revenue, decides to target real estate as the cash cow by increasing taxes, bills, fees and other associated costs on real estate transactions, then the value of real estate will definitely increase. The policy of government, such as numerous tax forms on companies operating in a particular area, could propel the relocation of the companies’ operations elsewhere. This relocation will often contribute to an increase in the value of land in such areas. Another factor that is hugely tied to the government and could affect the value of real estate in a particular area is infrastructural development. Unfortunately, in this part of the world, this is often irregular and the project time frame is uncertain. The moment a government decides to execute major infrastructural projects, like road, the value of most real estates in that area will increase. Also, increased interest by private organisations and individuals in an area will boost value. For instance, when you see more banks and schools opening up within a particular area, it is an indication that such an area is going to experience a boom. Most of these companies and organisations have huge funds to pay consultants and researchers and will hardly invest in building their factories in a particular area without an awareness of the various factors that an investor will consider. You may not have their budget but you should have enough good hutches to analyse and follow their trail. Doing so will not only save you time, it will also make you money. In addition, economic activities by companies where they are not detrimental to the environment are bound to increase the value of properties in those areas. There is a connection between where the jobs are and the value of real estate. When companies bring workers or jobs to an area, soon the workers would like to live close to their place of work and ultimately start investing in the real estate in those areas. The implication is an increased demand for houses to rent and land to buy. Then the law of supply and demand kicks in. However, on the down side, if the operations of a company are damaging to the environment, this could also cause a decline in the value of nearby properties. The presence of good neighbourhood organisations has been proven to contribute to an increase in the value of real estate. Where you have people of the same mind living in an area and they are able to organise themselves, arrange security, organise developmental works, provide a friendly and safe environment for families and look out for one another, such an area is a place to watch. For instance, a friend lives in an area where the neighbours are so organised; they have a branding team for their neighbourhood, they organise various bonding activities and are very keen on security. It is no wonder that the value of their area is ten times higher than neighbouring areas without such dynamics. Astute investors are good observers. When you watch neighbourhoods that are currently attractive and appreciating in value, what factors do you think set them apart? Good roads, schools, accessibility, government activities or policies? Think deep and observe. Then think of areas where those same factors seem to be converging. Those are the areas that are preparing to experience the next boom. Finally, the effect of inflation on the value of properties: Whenever there is an increase in the prices of commodities in a country, there is a direct and indirect effect on property value. When the cost of building new homes increases, the cost of renting older ones will definitely increase. This will also affect the number of new homes that are erected, thus causing a reduction in supply and more competition to rent or buy both older and newer homes. And because of the several dynamics of the real estate, it often increases beyond the rate of inflation. This is one more reason to invest in real estate; it often absorbs inflation effectively and takes its value beyond its reach. posted on August 27, 2013 at 12:00AM jtnng.blogspot/
Posted on: Mon, 26 Aug 2013 23:44:19 +0000
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