Factors Affecting Residential Real Estate
Residential Real Estate investment is a zone that many people are interested in, and it makes up a large part of the wealth of most homeowners. Knowing what factors affect residential investment is very important. These factors mostly refer to the things or situations that can make or break people’s investment decisions in residential property. By knowing these things, people or companies who want to invest in residential property can figure out the supply, demand, and market trends to make better decisions.
According to ICRA, Indian businesses will raise approximately USD 48 billion or Rs 3.5 trillion in 2022 through real estate and investments in infrastructure trusts.
Due to the vast size and scope of the residential property market, it’s becoming an enticing investment option for a growing number of people in India too.
Some Key Factors Affecting Residential Real Estate Market
There are many key factors affecting the residential real estate market. These are given below:
Location is among the most obvious things that affect a property’s value. Your current residence may be perfect because it’s close to your job or your parents’ house. But appraisers look at three main things to figure out how much value to give a house based on its location. According to Inman:
- The standard of local schools
- Employment opportunities
- Closeness to entertainment, shopping, and recreation centers
Some of these things can explain why some neighborhoods have high prices and others a few miles away don’t. Also, a home’s overall value can be affected by its proximity to utility lines, highways, and public transportation. When figuring out how much a house is worth, the location can be more essential than the house’s size or condition.
Home Size and Living Space
The size of the property is a big factor in how much it costs. For example, if the average price per square foot in Bangalore is Rs 10,150, you’ll get more for a 4,000-square-foot house than a 2,000-square-foot house.
Usable space is also important when figuring out how much a property is worth. Most garages, attics, and basements that still need to be finished need to be counted in the square footage that can be used. So, if your house is 2,000 square feet and your garage is 600 square feet, you only have 1,400 square feet of living space.
Buyers and appraisers care most about how much space there is to live in. The most valuable parts of a home are bedrooms and bathrooms, so the more bedrooms and bathrooms it has, the more it is usually worth.
Age and Condition
More recent homes typically appraise for more money. A buyer may save money if they purchase a home with recent plumbing, electrical, roof, and appliance systems less likely to break down. For instance, if a roof has a 25 years warranty, the owner will save money over the following two decades as opposed to an older home, which might need a new roof in just a few years.
A move-in-ready home will command high prices from many buyers. Most buyers negotiate repairs to avoid any high costs after the sale, which is why they demand an inspection factor in their contract.
Upgrades and Updates
In particular, upgrades and updates can increase the value of an older home’s features. But not every home improvement project is created equal.
Depending on the market you’re in and the value of your current home, a project or upgrade will have a different effect. A finished basement, for instance, is five times more valuable in Bangalore than in Andhra Pradesh, according to data from the home improvement value calculator, representing an increase of about 13% versus 2.5% in median home value.
Adding a pool or installing wood floors, for example, increases the value of a home for
expensive homes than remodeling a kitchen or adding a full bathroom, which tends to increase the value of less expensive homes.
The local market
The number of comparable properties in the neighborhood and the percentage of buyers in the market may impact your home’s value. It’s a seller’s market when many buyers are vying for a limited number of properties. On the other hand, a buyer’s market is one in which there are many homes for sale but few potential buyers.
If you’re purchasing a home in a buyer’s market, you’ll have more wiggle room to barter over the price, schedule, and contract contingencies. However, if you’re selling in a buyer’s market, you might need to adjust the price to draw in more bids or be prepared to make concessions to a seller.
Also, the market’s state may impact the time it takes to sell your house. Homes typically sell quickly in seller’s markets, while they typically spend longer in the buyer’s markets.
When the overall economy is weaker, the housing market may be affected by how easy it is for a person to buy or sell a home. For instance, if wage growth or employment tends to slow, fewer people may be able to afford a home, and fewer opportunities may exist to relocate in search of new opportunities. When deciding when to sell your home, staying informed about the local housing market’s sales and price growth trends is crucial.
Why are interest rates important? Your ability to afford a home is affected by short-term interest rates (like those on credit cards) and long-term interest rates (like mortgages) but in different ways. Your savings may earn more interest as short-term interest rates rise, but short-term debt becomes more expensive. For instance, if you’re spending more money on your credit card or short-term loan repayment, you’ll probably have less money to buy a home.
Short-term interest rates do not directly impact long-term interest rates. A 30-year, fixed-rate mortgage will cost less due to the Federal Funds rate rise. Inflation rates, investor sentiment, yields on Treasury securities, and other factors impact long-term rates.
Knowing the elements that affects the value of residential real estate makes it simpler to avoid common mistakes when selling your house. When determining the price of your home, keep these factors in mind to draw in serious buyers and avoid having it sit on the market for an extended period.
For more information, you can contact our professionals at Bhive.