Just another WordPress site

Factors that cause property price appreciation

175 0
Housing.com News lists some factors that contribute to property price rise real estate has always been considered as a fruitful asset in one’s investment portfolio, for the short term, as well as long term. Property is one of those few assets, which can offer you returns that are higher than the inflation rate. However, only a modest part of the population manages to invest in real estate, out of which only fewer can understand how the property market works and what really contributes to price appreciation in the property market.

Infrastructure development

Infrastructure development plays a key role in price appreciation. Any new connectivity, transport, road, or transit hub, will act as a growth driver, as these are expected to bring more population and ultimately, more demand. Investors who time the market right can get the most out of their real estate investment.

Let us understand this with an example.

Gurgaon’s property market is currently witnessing major demand from end-users and investors. New projects being launched in the region, are seeing major footfalls from serious buyers. This is because the upcoming Dwarka Expressway, a major infrastructure project, will boost connectivity between the national capital and Gurgaon. As a result, properties located along this stretch will become more attractive and fetch better returns for the investors. A similar trend was noticed when the Noida-Greater Noida Expressway was under construction. Prices moved from Rs 2,000 per sq ft to Rs 5,500 per sq ft in a matter of a few years, along this project. Similarly, localities, where the Mumbai Metro had traction, witnessed triple-digit price appreciation in just five to six years.

Upcoming or available amenities

Imagine a property without a parking space. Now, think of a similar property, with a parking space. This additional amenity can create a price difference of 10%-15%, especially in metro cities where parking in residential colonies may be a hassle. Property owners, who continue to upgrade their property, can get a better rate than the prevailing market rates. This could be a basement garage or a mini terrace garden or a kitchen lawn. In addition to this, the architectural design, upkeep, and interiors of the property, also play a pivotal role in price appreciation.

Local development

For a property market to appreciate, it is very important that the local neighborhood and the social infrastructure, support growth. A property in a gated residential colony with a functional residents’ welfare association (RWA) will be preferred to a stand-alone property located in a regular colony. Similarly, green cover, security surveillance, facilities in the immediate neighborhood, and the type of gentry residing in the area, can also result in property appreciation. In an area, where stand-alone properties give way to independent floor constructions, the properties may become more preferred but they may not appreciate in terms of value.

Policy changes

One major policy that directly impacts real estate appreciation, is lending rates. The cheaper cost of borrowing brings more buyers to the market, creating more demand and appreciation. Similarly, reductions in stamp duty rates, circle rates, GST rates, income tax benefits, etc., directly impact demand.

Economic situation

A country’s economic condition also plays a vital role in property appreciation. If the inflation rate is high, the value of money will reduce. This means that a builder would need to spend more on input items like construction materials, labor, permits, etc. However, this does not imply that property prices will rise, irrespective of the growth drivers. For prices to grow, properties have to meet several requirements, including accessibility, infrastructural requirement, and availability of residential properties. In addition to this, the overall economic indicators such as GDP, purchasing power parity, and unemployment rate, also contribute to price growth in the long run.

Source- https://housing.com/news/top-5-factors-make-property-prices-appreciate/

Leave A Reply

Your email address will not be published.