But why do some properties increase in value and others don’t?
Supply and demand
Just because there is population growth in a certain area doesn’t guarantee a low vacancy rate. It is that basic supply and demand principle we learned in school – if population growth coincides with an oversupply of property, it doesn’t matter how many people are there – if there are too many properties, they will not be filled. If town planners are holding back on releasing more land for development and the area is a desirable place to live there will be an undersupply of property, which of course will drive up the prices.
Taking shortcuts to save money
For developers to maximise their profits – due to high labour and material costs – they sometimes take shortcuts. These can include squeezing a few houses onto a small piece of land. Otherwise, in order to get that lucrative 4th bedroom, sacrifices need to be made, such as the kitchen or living area may be made smaller.
Who are the people in your neighbourhood?
What’s been happening in the neighbourhood lately? Has the once thriving area started a downward slide? It can be just a matter of a few streets that could make all the difference in values increasing, stagnating or heading in reverse.
What school zone are you in?
Any property in the zone of a top ranking high school will always generate more capital value compared to a property that is in the area of a lower ranked school. Schools are big business, and parents will go to great lengths to get their kids into certain schools, so they will drive the value up in those areas.
What other things will contribute to a property’s value increasing or decreasing? If you haven’t bought a rental property yet, these are all things to consider before making a purchase.