Many people's ideal life includes being able to call their own house their own, but how much does that ideal cost?
The second half of 2019 witnessed a dramatic shift in the direction of the Australian real estate market, with prices rocketing upwards, in particular in the cities of Sydney and Melbourne. It was anticipated that this would carry on into 2020; however, the summer of bushfires and the pandemic caused by the coronavirus have thrown off any predictions that property experts may have made.
At the moment, there is a prohibition in place that applies to non-essential activities like open houses and auctions. The cash rate in Australia was also lowered to a record low of 0.25 percent by the Reserve Bank of Australia (RBA), which resulted in home loan rates reaching their all-time low point.
Factors that affect property value
What factors contribute to both increases and decreases in property values? Property values can be affected by a wide variety of factors, including supply and demand, location, facilities, and planned infrastructure development projects.
Location affects a property's value the most. Is it downtown? Is it waterfront? Are public transportation, shops, schools, and restaurants nearby? Properties near where people work and play are more expensive because people want to live there. Due to unemployment or crime rates, some suburbs have a better reputation than others. Two homes on the same street with different postcodes can have vastly different values.
Location is as important as the property itself. A property's value can be increased by its proximity to a CBD, affluent neighbourhoods, or desirable landmarks like shopping centres or the beach. Proximity to a jail, airport, or low-socioeconomic area will lower a property's price.
The suburb's population and demographics affect a property's value. Suburban three- and four-bedroom homes are more expensive, for example. In the CBD, workers and students prefer one- and two-bedroom apartments.
More people wanting to live in a suburb increases property demand. The type of residents also affects property values. Multi-bedroom houses will be more popular than small apartments if young families dominate the area.
Size and facilities
The more bedrooms and bathrooms a property has, the more it will cost. Garages, pools, backyards, air-conditioning, patios, balconies, the list is endless, all affect a property's value. A city apartment with a parking space is valuable. Suburban homes with large backyards are ideal for families and add value.
Features and size affect a property's value. A four-bedroom house in the same area may fetch more. Extra bathrooms, garages, pools, and entertaining outdoor areas can boost property value. In busy cities, parking is also important, and a home's layout must be functional.
Never undervalue the effect that a property's street appeal has on potential buyers. Because first impressions are so important in the real estate industry, the way a house appears from the outside can immediately add or subtract tens of thousands of dollars from the value of the property.
Appearance and age
Although it's not fair to judge a book by its cover, most of us do evaluate a property based on its aesthetic and its outside appearance. And while we should show our elders respect, it's important to remember that older homes typically sell for less money. Even if the inside of the house is beautiful, very few people want to live in a house that has a lovely interior but looks run down from the outside.
Potential for renovations
When purchasing a home, many people have the desire to personalise it in some way, which may take the form of a small or significant investment. The property's desirability and value will increase if there is room for enhancements such as a swimming pool, additional bedrooms, or even an additional floor.
It is essential for homebuyers as well as investors to consider the growth potential of the property, which includes the possibility of adding an additional bedroom or storey, increasing the floor space, or adding a pool or outdoor patio. The resale value of a property is going to go up if the buyer has the ability to make improvements and give it their own personal touch by performing home renovations.
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Potential for investment
The value of a property that is presented to investors is also impacted by the potential of the property. It is important to consider aspects such as the amount of rental income an investor can anticipate receiving from a property as well as the amount of capital growth they will experience when they eventually sell the property.
An attractive investment property is one that can be upgraded in order to increase its value and then be resold at a later time. In a similar vein, investors will be interested in purchasing real estate in an area that is forecasted to expand, rise in value, or be popular among renters.
With more people working from home and employers seeing the benefits, this may be the new norm after the coronavirus pandemic. That means higher utility bills. Energy-efficient light bulbs and appliances add value to a home. High-quality materials are easier to heat and cool, adding value.
High-quality materials make a home easier to heat and cool, which increases its value. Solar panels, insulation, and double-glazed windows can add value and appeal given high electricity and gas bills.
The Reserve Bank's monetary policy can affect property value. If the Reserve Bank raises the official cash rate and lenders worldwide raise mortgage rates, monthly mortgage payments rise. This affects property affordability, reducing competition in the real estate market and lowering prices. A lower interest rate makes buying more affordable, which could boost property prices.
Cheaper interest rates and easy credit availability boost property prices.
The property market has been the economy's bright spot in the last year, thanks to RBA cash rate cuts. When the RBA cuts rates, it's cheaper to buy a home. This increases demand and home prices. Mortgages become less affordable when the RBA raises rates.
The state of the economy is yet another component that contributes to price shifts in real estate. The amount of money that each person has and, as a direct result, the number of people who are able to purchase a home is impacted by a variety of factors, including unemployment and wage levels, population growth, and the value of the Australian dollar.
The performance of the economy as a whole is another factor that can influence the state of the housing market. If the economy is experiencing robust growth, employment, and labour conditions, more people in Australia will be able to afford the purchase of a home, which will lead to an increase in the value of existing homes.
Demand and market performance
Property prices rise when demand exceeds supply. More people are looking for fewer homes, so competition drives up prices.
Supply and demand determine market prices. If homes are in high demand, prices will rise. When there are too many properties and not enough buyers, prices fall.
Your local real estate market can affect your property's value. If there's little demand for houses in the neighbourhood and they're selling below asking price, values will fall.
All the factors above affect property prices, but we live in unprecedented times, so no one can predict the next six months.
If you have a secure job and are looking for a home, you're in good shape. Low market activity and high property prices give buyers negotiating power.
Important factors that can lower your property's value
There are a lot of things that can lower the value of your property, such as a shoddy renovation job, the proximity of a brothel to your home, or the fact that you live in an area that is prone to bushfires.
You will want to maximise the value of the property and achieve the highest possible sale price, regardless of whether you are selling a primary residence or an investment property. Although there are a lot of things that you, as a homeowner, can do to increase the value of your home, there are also a lot of factors outside of your control that could be bringing the price of your property down.
The general state of disrepair
This may seem obvious, but it can lower your home's value. If you've ever been to a chaotic open house, you know that some homeowners don't understand the importance of a clean home when selling.
Overgrown lawns and gardens, doors that don't close properly, mouldy walls, and cracked or broken windows can all turn off buyers. It will make your home look unattractive, and buyers will factor in the cost of repairs before making an offer.
Taking care of maintenance, repainting, and replacing old fixtures can boost your property's value.
Bad kerb appeal
First impressions matter when selling a home. If your house needs painting, pruning, or a new fence, the asking price drops.
Some things you think add kerb appeal can turn off buyers. You may love garden gnomes and have them in your front garden, but buyers may not.
Before selling, make sure your home is in good shape. Maintain the garden, fence, and letterbox.
Forgetting to de-personalise
When a prospective purchaser comes to look at your home, they will go through each room and try to imagine themselves living there. If it is difficult for them to do that, it is possible that they will be less likely to make an offer. It is in no one's best interest to be constantly reminded about the previous owners of a home; as a result, features such as a vividly coloured children's room, complete with the child's name and selection of artwork, can lower the value of the home.
Low kitchen and bathroom aesthetics
Even though it is important for prospective buyers to consider every aspect of a house, the kitchen and bathroom are two rooms that will receive an especially close look. Potential buyers will want to be able to quickly and easily prepare meals there every day because the kitchen is one of the rooms in the house that gets the most use. On the other hand, they will hope that the bathroom can serve as a place where they can unwind and relax at the end of a long day.
Therefore, if your kitchen is impractical and has a limited amount of space for food preparation, and if your bathroom has mosaic tiles and a poor layout, this can have a significant impact on the appeal of your home as a whole. Spend some time addressing those concerns.
If you know what you're doing, a DIY renovation can save you money and improve your home's look. Uneven paint, tiles, or joins will turn off buyers.
Your renovation must complement your home and neighbourhood. Suppose a neighborhood's heritage architecture attracts buyers. Your ultra-modern man cave addition probably won't impress them.
Before renovating, extending, or improving your home, get council approval. When a building inspection reveals that one of your bedrooms is too short or that your backyard pergola violates council regulations, your property value will suffer.
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When prospective buyers examine a home, sight isn't the only sense they use; their sense of smell also plays a significant role in determining how much they believe the home is worth. Before opening your doors for an inspection, you should have the carpet professionally cleaned if it has unpleasant pet odours that have accumulated over the course of several years and are now living in the carpet.
Location and market factors
It is possible that the perceived value of your property will decrease if there are a large number of properties that are comparable to yours that are listed on the market at the same time.
Imagine there are only a handful of potential buyers, and each of them has access to a long list of other properties that are comparable to the one they are interested in purchasing. If this is the case, you will have to compete with multiple comparable properties, some of which may have more appealing features than the one you are selling; as a result, your asking price may be lower than those of the other properties.
How much you can sell your home depends on its suburb and street. If the area is popular, that's good for your sale price. Being near restaurants, schools, shopping centres, and public transportation can help.
Neighborhood factors can devalue your home. If your area has many mortgage defaults, buyers will offer less. Similarly, a congested road, a busy flight path, or a sewage treatment plant will lower prices.
A cemetery, brothel, or hostel nearby may deter buyers.
Rowdy neighbours may also lower your home's value. They never mow their lawn, have car wrecks in their front yard, throw parties every other night, and police often visit. Unwanted neighbours will turn off many buyers.
You and your neighbour may be fighting over property lines, overhanging trees, or another issue. New buyers won't want to inherit your problems, lowering prices.
Schools with a bad reputation
Do the schools in your neighbourhood have a reputation for being unreliable? Would it be difficult for parents to send their children to the primary or secondary school in your community? If this is the case, young families will be less interested in purchasing your home. When you put your house up for sale, you might be able to get a little bit more money for it if it is located within the school catchment area of one or more popular schools.
Flood or bushfire risk
Is the area where your house is situated prone to devastating bushfires or flooding during certain times of the year? If this is the case, it will have an effect on the amount of money that many people are willing to pay in order to live there. It is important to make sure that your home satisfies any requirements for buildings in areas that are prone to bushfires, and it is a good idea to study flood maps before making a purchase in those areas.
FAQs About property value
Technically speaking, a property's value is defined as the present worth of future benefits arising from the ownership of the property. Unlike many consumer goods that are quickly used, the benefits of real property are generally realized over a long period of time.
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Making your house more efficient, adding square footage, upgrading the kitchen or bath and installing smart-home technology can help increase its value.
During a home sale, the bank that offers the home loan will typically select an appraiser to render an opinion about the value of real estate as of a specific date. Comparable sales, also known as the "market data" approach, is the most common way to arrive at market value.
There are five main methods used when conducting a property evaluation; the comparison, profits, residual, contractors and that of the investment. A property valuer can use one of more of these methods when calculating the market or rental value of a property.