Source: The Real Estate Conversation
This well-known catchphrase expresses the fundamental idea that the area or location of a property is the most important factor in determining its worth.
However, there are many additional variables that will determine how a location becomes valuable and whether it will remain so.
Some desirable location factors are constant, for example – proximity to infrastructures such as beach, river, schools, shops and transport. Others are transient, such as proximity to work and leisure facilities. Many people desire to live close to the CBD and to varying degrees, the value of inner-city suburbs can change quite dramatically depending on whether they have been gentrified or not.
It is a worthwhile investment of time to investigate the future planning for the suburb or area in which you are looking to buy or sell. Some suburbs have a poor reputation, but a generally appealing aesthetic and a positive economic outlook may change this perspective.
Suburbs that may not have the greatest reputation can often benefit from a “facelift”, Fremantle is one impressive example of this. If the street itself looks aesthetically appealing with freshly maintained houses and properties this can create a good first impression for a buyer, which in turn will increase the potential value of your home.
Furthermore, if people desire to live in a newly renovated neighbourhood and there are fewer properties available that can be supplied (increase in supply & demand), then prices will increase thereby causing an increase in the property market performance for that area.
The general economic outlook can also influence the value of your property. If there is a positive outlook with increased employment opportunities and strong economic growth, people are more likely to be optimistic about obtaining a mortgage, this is especially true if the interest rates are reasonable.
The Reserve Bank determines the official cash rate, which the lending institutions pass on via the rate of interest on home loans. If the rate is raised, then the mortgage repayments will increase and as an effect, if people do not think they can afford to borrow money there will be less demand for houses and thus the prices will fall in the real estate market.
Property values can also fluctuate depending on who may want to live in a certain area. For example, many large homes may be built to accommodate families, but with time those situations change and people look to downsize to smaller apartments or houses.
The houses age and lose their original value and the area may become less popular. The opposite can occur in areas with higher density that may attract single people or couples with no children.