For most people, a home is undoubtedly the biggest investment of a lifetime. Typically, but not always, the value of a house rises over time due to many reasons including:
• inflation
• capital investment
• mortgage rates
• supply and demand
• proximity to schools, shopping, parks and other attractions
• population changes
• infrastructure improvements
• crime levels; and
• desirability of an area.
An understanding of why property values go up or down can help you make sound real estate investment decisions. Here’s a couple of key things to keep in mind when looking to buy a new property.
Basic Demand and Supply
You’ve probably heard about how much Victoria and Melbourne is growing in terms of population, and this in turn has helped fuel economic growth.
In simple terms, Victoria has been growing by about 130,000 a year for the past few years, and this is forecast to continue for the next few years.
Basically, the state government is investing significantly in infrastructure, jobs are being created and people are migrating in.
This population growth will continue to drive demand for property for the foreseeable future. People have to live somewhere.
The population of Victoria is expected to hit 10 million people by the 2050s and Melbourne’s population will double by 2031, according to the Australian Bureau of Statistics. Victoria is projected to hit 7.5 to 7.9 million people by 2026.
The big problem is that not enough homes are being built to meet demand, so when supply exceeds demand you generally get price increases, and with low interest rates people can borrow a bit more money to buy a house.
It seems inevitable that property prices will rise across Melbourne.
Other homeowners are selling their family homes for good prices and right sizing (shifting to a smaller home at a lower price that is more suited to their needs) and using the cash leftover from the two transactions to fund their lifestyle.
Mortgage Rates
The level of interest rates can affect the demand for real estate. Falling mortgage rates tend to lead to greater demand for property and faster increases in property prices. With an increase in mortgage rates, the demand for property tends to come down and vice versa. Currently, Australia is enjoying very low interest rates which is making property investment an attractive and more affordable option for many people.
Population Growth
Population growth will also affect the availability of homes for buyers. Melbourne and Victoria is growing by thousands of people each month. The increased demand for property often leads to higher prices. Improved housing affordability and low interest rates have released significant pent-up buyer demand built up over recent years, with an increasing number of looking to buy now rather than later.
Location location
The location of a house is one reason that can significantly affect its value. The proximity to schools, shopping centers, parks, colleges and cultural facilities can fuel demand for such a property, thus causing its value to rise.
