In most countries of the world, it is believed that real estate prices keep increasing in value. However, this belief has got a lot to do with the historical data on real estate. Most people expect this trend to continue. Nevertheless, this may not always be true since the real estate market doesn’t work that way.
Here are a few factors that may cause the real estate value to increase:
Change in Zoning Laws
A change in zoning laws could bring about a change in real estate prices. For instance, there was a time when most of the land in the USA was considered agricultural land. This was 50 years ago when the population was low and the land prices were low. With the change in zoning laws that allowed land to be used for residential and commercial purposes, the land value started increasing, especially in locations closer to megacities. This is one of the reasons why there has been an appreciation in real estate value over the past 50 years. Nothing can be said about this trend getting repeated for the next 50 years or so.
Development of Infrastructure
Infrastructure development is very much essential whenever or wherever there is residential or commercial construction going on. There will be requirements for new roads, schools, hospitals, and markets, as the live-ability increases. Also, infrastructure development is not something that can happen overnight. It may take almost a decade for the entire project to get completed. As and when there are some visible changes, real estate values will keep increasing.
Connectivity to Workplaces
No one likes long commutes. Apart from the effort, this will also take a lot of time and money. Hence most people, especially millennials, prefer staying closer to their workplaces, or at least in areas that are well-connected to their workplaces. As a result, properties closer to central business districts will claim premium prices. If these central business districts get relocated to the outskirts of cities, the property prices there will start appreciating.
In most cases, popular residential areas become hotspots for social activities. You will suddenly find many hobby classes cropping up here and there, along with shopping malls, multiplexes, and several restaurants. With such things improving the lifestyle of the local residents, property prices will automatically start rising in value. More and more people would want to live in such developed locations despite the increase in price.
Apart from the above, inflation is also one reason for property prices to increase year after year. Like the prices of everything else, the prices of steel, cement, and skilled labor will also keep increasing every year, which makes properties more and more expensive. Ideally, you have to see at least a two to three percent increase in your property value every year. This is when you know inflation is actually causing the price of your property to increase.
The Bottom Line
The rise in property prices makes it very lucrative to invest in real estate. Understanding the reason behind such increases makes it easier to evaluate such investments.
If this is the first time you are investing in real estate, make sure you look for a property in a developed or developing location that has all the infrastructure in place and offers excellent connectivity. It would be wiser to get preapproved so that you know what kind of properties you need to be looking for, especially if you are planning to take out a mortgage. Get in touch with a few lenders through mortgage leads and find out how much loan you are eligible for.
Buying real estate is one of the major decisions you would be making in your life. Make sure you do your homework well before you execute this decision.