Higher ground: Five factors that drive property appreciation
For the uninitiated, taking that first stab at buying property would almost always be for the sole purpose of owning a home. While this is a pretty solid reason to venture into the real estate biz, it’s also advisable to be more future-oriented when it comes to considering the property that you are going to invest your hard-earned money on.
Think about it the way you would tickets to basketball finals. You buy VIP or premium tickets early in the season, and then when the games come and you find yourself unable to watch it, you sell the tickets—but for a higher price. It’s a similar concept when it comes to property—you buy it relatively cheap, and should fate eventually lead you to move to another location, the ideal situation is you sell it for a great deal more than you paid for. That’s property appreciation, or the rise of your property’s market value, in a nutshell.
What impacts the value of your property? Several factors come into play…
The Classic: ‘Location, location, location’
Some neighborhoods are simply worth more than others. In every city, you will find a high- and low-end district—and, though not the only factor, they largely have to do with the property’s location. In the Philippine capital of Metro Manila, you can’t expect to sell a two-bedroom condominium unit in Las Piñas for the same price as a 2BR in the prime business district of Makati.
It’s the same factor at play with a two-storey house in a suburb in Davao City being priced the same as, say, a two-bedroom unit in a CBD in Metro Manila. Even in a subdivision with identically designed houses, a house located in a corner lot or nearer the clubhouse or school or the bus stop would sell higher than one located further into the neighborhood.
Conversely, if you happen to have bought property in an area that is suddenly seeing a lot of infrastructure rise around it in recent years, your property is likely to witness a pleasant jump in perceived market value.
A key factor affecting the value of real estate is the overall health of the economy, which is generally measured by such indicators as GDP, employment, manufacturing activity, interest rates, and the prices of goods, among others.
When a country is experiencing an economic downturn — remember the United States in 2008? — it follows that real estate values are likely to take a dive, too.
Accessibility: Proximity to public transport
A report on single-family home premiums in the United States revealed that increasingly, as demand for in-town living rises and with residents demanding accessibility to local events and work, proximity to public transport is significantly important. While the study sample is based on residents in the U.S., the same trend is prevalent in Southeast Asia where countries are undergoing varying grades of growth and transformation, and where bustling metropolises are now the preferred residential addresses of a country’s working population.
As such, residential housing and condominium properties built near the train stations, as well as bus stops that grant them access to train stations, tend to sell the quickest—especially if the demand in a certain area, i.e. an up-and-coming hipster neighborhood, is high.
Properties easily accessible from people’s workplaces, as well as close to educational institutions and leisure centers/shopping malls, generally command higher value. There’s even a ripple effect that trickles down to commercial properties—they tend to increase in value when they are close to populated areas with high foot traffic. Agricultural properties likewise increase in market value when road infrastructures are developed within their vicinity as it makes it easier and faster to deliver produce.
Street cred: The reputation of your property developer
Condominiums and subdivisions built by real estate developers with exemplary reputations are generally perceived as higher quality, thus have higher resale value. It therefore makes sense for home buyers to do their due diligence on a property developer’s background. See if the company turns over its projects on time, if they use good materials (best to consult an engineer or architect on this), if current residents of their existing properties are happy about the finished products, or if they managed to live up to their sales pitches.
Residents in large estates built by leading real estate developers, such as Dasmariñas Village and Forbes Park in the Makati CBD in Metro Manila for example, consistently see greater yields in their residential properties.
In culture-rich Southeast Asia, believe it or not, but the street number of your house, or the floor number of your condominium unit, is an unexpected factor when it comes to the value of your property. It’s precisely why real estate companies tend to veer away from including unlucky numbers like 4 and 13 in their developments—it is very rare that you will find condominiums in Southeast Asian cities with 4th and 13th floors as these are deemed unlucky in Feng Shui. Conversely, units in the 8th floor or addresses ending in 8 are deemed quite lucky, especially by Chinese buyers.