Extrinsic Factors Affecting Real Estate Prices
There are many factors that control the real estate prices in the market. It doesn’t matter whether you are a buyer or a lender, but these market factors always play an instrumental role. Let me discuss them with you.
Interest Rates – An inverse relation exists between the interest rates and the property prices. If the interest rates are high, then the prices of the real estate property are lower and vice versa. What’s more, at low interest rates, more people can buy their first homes or second homes or investment property and as the result housing demand is created in the real estate market.
Rent Controls – State restrictions on the rent controls will automatically result in fewer buyers. The rental legislations are subject to change and modification depending on the State. You can search for the latest State rental legislations by typing the keyword, “landlord tenant law” in search engines.
Taxes – The places where high municipal property taxes are prevalent, purchasers are delimited to purchase the real estate property in that region. If the taxes are increased, it is eminent that there would be a drop in real estate prices. There are still many State taxes like the property purchase tax or the speculative tax can also make the confidence of the buyers lose. For the federal tax legislations like the down turn in capital gain tax can also limit the investors from investing in the real estate property market of the area. Therefore, these points play a crucial role in assessing the real estate activity and the prices in general.
Economy – A positive growing economy with high buoyancy makes the investors’ and the buyers’ confidence high. There would be a high market activity marked by increased selling and purchasing of homes, and this would result in increased market prices. And if the market behaviour shows sluggish movement, converse will happen. In such a scenario, both the buyer as well as investor will lose confidence and low market activity marked by poor selling and purchasing of homes, and this would automatically result in depreciation of the market prices of the homes.
Location – A real estate property placed in good and commercially valued location will have high property value as compared to the property, which has low commercial value. Naturally, high commercially significant properties attract more investors’ and buyers’ than any other property.
Land Availability – Factors such as land shortage; zoning restrictions in the municipalities; State land-use laws; and other type of ongoing laws that restrict the land use, would make the housing prices increase.
Public Image – There is certain type of public notion build to an area or the geographical region or the residential property. This can affect the demand as well as the prices of the property to a large extent. There are certain properties located in the States that are much in public demand. Such properties always have an appreciated value.
Immigration/Emigration – A scenic topography with plenty of retiring opportunities, high scale business options; good employment opportunities; tourism etc. aids in attracting people from other countries as well as people from country within. Therefore, immigration to an area increases the property value and conversely emigration results in depreciated property value.
Vacancy Conditions – If the region shows high vacancy levels, the real estate sales can dip and this also affects the confidence of an investor. Conversely, low vacancy levels can increase the activity of first homebuyers and those of investors as well.
Seasonal Factors – There are certain months in a year where the real estate sales move down. This also results in lowest real estate prices. This is also true for the recreational properties and other types of properties.
Political Factors – The State and the municipal government rulings can affect the property prices. This in turn can also affect the demand and the supply of the real estate property.
