Rising property prices: 5 factors that affect property value
With house prices rising at their fastest pace for 15 yearsaccording to Halifax, this is the perfect time to look at five factors which influence the value of a property – and offer some property investment tips to help you make the most of this booming market.
Likewise, if you are looking to buy a home with an eye on making a profit in the future, you should choose your property carefully and consider these factors which will affect its value. After all, capital appreciation is not just forinvestors.
The biggest and arguably most important factor to consider is the location of the property. At the most basic level, you want to buy a property in the places where demand is highest. This holds true for both investors looking to rent the property out, and home buyers who will want to sell the property a few years down the line for a profit.
Many different factors come into play here, including whether a property is in the city centre or not, its proximity to local schools and universities, nearby amenities, convenient transport options, and much more. If you can find a property that is within easy reach of everything that people need to live a good life, then it is likely that you are making a good purchase.
The size of a property has always been important in determining its value, but the ongoing lifestyle changes due to the Covid-19 pandemic. All value is relative to peoples’ desires, and the last 18 months in particular have seen a so-called ‘race for space’ take off. The rise of home working, and the realisation by many that they’re willing to pay higher prices for more space, has put a premium on larger apartments.
Data fromAlliance City Livingregarding theManchestermarket demonstrates this principle in action. The best-performing unit type this quarter were 2-bed apartments, which increased rental values by 5.9% (+£62.90 pcm) to £1,149 pcm. This is a new record high for 2-bed apartments in the city, and it follows on the heels of 3-bed apartments which were the most popular type in Q2 2021, and have now achieved an average rent of £1,622 pcm.
Clearly, there is value in buying property which is in high demand, and when making your choice you should consider the desire for space as part of it.
The number of available properties in a neighbourhood will have an affect on values, particularly if there are a large number of the same unit type – or at least, that is the traditional thinking. In reality, it is more important to find out whether there is a surplus of available property rather than look at how many of a specific unit type there is in an area.
Fundamentally it is irrelevant how many similar properties there are to yours if you are following a strong property investment strategy and buying in the right area. Where demand is high, your property will continue to rise in value regardless of whether it is in a block of comparable properties. For example, lets look at Manchester once again.
While there are scheduled to be more than12,000 new homescompleted in the city by 2025, the population is predicted to grow by as much as 70,000 over that same time period – creating an even greater shortfall of properties.
Demand in Manchester city centre has alreadyincreased by 36%in a year according to Rightmove, and the shortage of properties expected in the future will only increase demand even further. This will lead to house price rises as high as 25.8% by 2026 according to JLL.