Home+Site Price Trends, Global and Local
3 Influencers Of RE Prices -- Do You Know Them All?
Around the world, home prices are affordable but only because jobs are scarce, startups struggling, and income low. These two 2013 articles are from (1) The Economist, Jan 12, on prices, and (2) a new contributor, J. Diamond, Feb 7 on locational factors.
by The Economist and by Jared R. Diamond
In the countries we track, house-on-land prices are rising and falling in equal numbers. Over the past year prices have jumped most in Hong Kong. They have dropped by 9.3% in Spain, the heaviest faller. The overall trend is down, however, since in three of the countries where prices are rising they are doing so at a slower pace than a year ago—in Canada, for example, they are up by 3.3% compared with 7.1% 12 months ago.
In America, a year ago prices were still falling, by 3.6%.; the latest data show prices rising by 4.3%.
Evaluation displays a massive range, from a whopping 78% overvaluation in Canada to an undervaluation of 37% in Japan. Another measure stretches from a 35% overvaluation in France to a 36% undervaluation, again in Japan.
In Spain, declines have gathered momentum (the 9.3% fall in our latest round-up follows a drop of 5.5% the previous year) and home+land is still over-valued 20%. In Italy and the Netherlands the pace of decline has quickened; in France prices are now edging down after a brief recovery.
The anomaly among Europe’s big economies is Germany, where prices are rising by a restrained 2.7%, the same pace as a year earlier.
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JJS: Income -- one’s ability to pay -- of course is a big factor in setting price, but so is location, its attractiveness, determining one’s willingness to pay.
3 Influencers Of Real Estate Prices: Do You Know Them All?
There are numerous reports about how the housing market in the U.S. has been showing signs of recovery and how this has increased optimism amongst homeowners and investors alike. Very few of these reports talk about the actual factors that determine the value of a home or lot. Location is the most crucial variable influencing the valuation of a parcel—residential or commercial. This is the foremost factor that will determine the appreciation as well as resale value of the property. A “good” location is bound to fetch or attract a better price than others.
Quality of Life: Does It Matter?
So, how does one determine if the location is “good” or not? There is a very simple checklist which can help you check the worthiness of a house plus site . A home located in a terrific or above average school district, with easy access to work hubs and leisure areas, will top the list in being the most coveted and desired. If there is easy access to supermarkets, highways, parks, a movie theater, and restaurants, more buyers will be eager to own it.
Laura Sebastian’s capacity as a real estate credit consultant affords her a unique look inside the decision process. She discusses home purchasing strategies with her clients at HomeStarSearch, an aggregator of lease purchase option home availabilities . She posits “the value of a home in a suburb which is a short distance from an expanding metropolitan area is sure to appreciate over the years as the employment opportunities increase and the population grows.” In some states, both of these things are happening, in others, neither. Similarly, a parcel located in an area which has seen many foreclosures will not sustain or be able to hold a high market value. No one wants to live in an empty neighborhood and also living around homes filled by renters is not appealing either which is what is happening in many cases if a home cannot sell.
Combined with other factors such as the timing of the sale and the condition of the building, a seller with property in a sought-after location can reap a cool profit. The sale will have to be at a time when very few parcels in the area are on the market. The buyer will want a home or building that has been well-kept and without any incurable defects. Being located close to a freeway, a bus stop, an airport, or on an extremely busy street are some examples of incurable defects. Sebastian adds, “Some properties located in specific areas—for instance, a beach house or a cabin in the woods—will have a higher value due to the image associated with such real estate.”
A Prudent Option
Here, it is important to remember that buying or selling is not the only option available for people seeking to capture the rental value of a location. The renovation potential of the structure can be assessed to arrive at a decision. “If the buyer intends to demolish the existing structure and rebuild, they will not be interested in paying a good price for the existing building. Sprucing up the place with some essential repairs and renting it out can prove more profitable in the long run than an outright sale,” says Sebastian.
The possibility of appreciation of land value, local laws and taxes, and condition of the economy, are other factors that will influence property prices. The prevalence of crime is vital too; Chicago is in the limelight for this. Having said this, it remains a fact that each property is unique and has its own set of pros and cons. Thus, what works for you may not be that appealing to someone else. It is up to the buyer (or renter!) and seller to analyze all the factors involved and decide what is best suited for their specific needs.
JJS: The author is an active online contributor for a host of publications. He avidly discusses real estate trends as well as their economic impacts. JRD holds a B.A. in Economics from The Ohio State University. If you have an article, especially a newsy one, please submit. Our views may or may not overlap with those of our contributors. Thanks.
Why do Americans refer to land as “property”? I imagine it is to reinforce individual ownership of a part of Earth. Other ownerships are not reinforced. Cars, jewels, portraits are not called “property”. Land ownership is based on shady behavior such as speculation, eviction, even slaughter of previous occupants. Like the judge said, all titles are based on force or fraud. I suppose “property” is an attempt to gloss over that fact.
That said, of course people are entitled to own some land and live there in privacy. Yet what makes that arrangement legitimate is not pay an individual seller or leaser but to pay one’s neighbors who keep off the location and pay one’s community who supplies the infrastructure and pay one’s society who bestow the laws and customs that make one’s ownership safe. Thus it’s not price and mortgage and title that makes ownership valid but land dues, paying rent to one’s locality.
BTW, if you’d like to see an interesting video on gentrification in Pittsburgh, a former land-taxing town, click here .
Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .
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