Real estate will continue to be the preferred investment class worldwide. Smart real estate investing can change our lives by giving us enough money to make our dreams come true. Today, most of us have an investment portfolio that consists of a variety of investments, be it stocks, bonds, gold, etc. However, most of the people have still undervalued or ignored real estate investment. With the huge economic boom in most cities in India, the average income has increased, giving us additional capital to invest in the future, and real estate may be the ideal investment opportunity for you.
The price of real estate depends on various factors such as location, demand and supply, interest rates, future development plans, etc. Some investors buy properties for the purpose of selling them later, when supply is low to take advantage of price increase.
What is the appreciation rate?
In real estate, appreciation refers to the value of your property, or how much the value increases over time. You get several benefits when real estate grows and increases in value. First, you can get more by selling your property. As long as the demand is high in your market, you can get a higher selling price and therefore earn more profit.
5 Reasons for property price appreciation!
Demand & Supply:-
When the demand for housing in a given area increases. Property prices rise unless the number of housing projects built to meet the demand does not recover quickly enough. Home buyers who buy houses for their own use are willing to pay extra if the locality is attractive and desirable for living. The ideal moment for home buyers to buy a property in areas with great upward potential, is a period when investor activity has not yet begun.
Features of property:–
The property’s facilities and improvements also affect its value. For example, remodeling a home, installation of wooden cabinet can increase its value. Decorating a basement, adding another bathroom, or replacing carpet with tiles are other examples of improvements that add value. In addition, the availability of parking spaces has a major impact on the value of the property. Parking spaces can create a price difference of 10% to 15%, especially in metropolitan areas where parking in residential areas can be a problem.
Owners who continue to improve their property may receive a higher rate than current market prices. This can be a basement garage, a kitchen lawn, or a small garden terrace. In addition to this, the property’s architectural design, maintenance and interior also play a crucial role in property price appreciation.
The location of the property is a major influencing factor. As the area around your property grows, new businesses emerge and new jobs open up, local housing prices tend to rise. If society struggles, or companies shut down then lower values are usually achieved.
For property price appreciation, it is important that the social infrastructure and the local area support growth. Property in a gated community with an active Residents Welfare Association (RWA) will be preferred over independent property located in a common area. Likewise, green cover, security surveillance, and facilities in the immediate vicinity can also add value to the property.
Infrastructure development plays a pivoted role in property price appreciation. Any type of development like trans-infra projects will boost the value. They are expected to drive population growth and ultimately increase demand. Investors who identify the right time to enter the market can get the most out of their real estate investment.
Impact of Government Policies:-
One of the important policies that have a direct impact on the growth in property values is interest rates on loans. The lower rate of interest attracts more buyers to the market, creating greater demand and great property price appreciation. Similarly, lowering stamp duties, GST rates, circle rates, income tax exemptions, etc. directly affects demand. In addition, the introduction of the Real Estate (Regulation and Development) Act 2016 (RERA) has created great trust among home buyers. This may not directly affect property prices, but streamlines the process of buying homes. Also home buyers can challenge offenses conducted by a builder. Such as property rights, delays or changes to the master plan without your consent, etc. This transparency helps with integrated development of the real estate industry.
Tips to improve property price appreciation!
In general, the national average property price appreciation rate for real estate is between 3% and 5%. However, this can vary greatly and really depends on the unique factors of your long-term ownership. Fortunately, if your real estate investment does not appreciate as you would like to see, there are several ways to increase the value of your property.
- Improve efficiency of property: If you can reduce the amount of energy needed to run a property, you should gradually increase its value. This could mean replacing appliances with EnergyStar, installing solar panels,planting trees around the house.
- Increasing property square footage: Increasing living space to a property increases its value. You can build an ADU or guest house at the back of the house, or add a basement.
- Make smart improvements: Improving your property can add value, but be sure to make the right choices. Not all upgrades increase the value, some can degrade the existing value as well.