As an investor, your greatest aim is to diversify your portfolio. Ideally, every investor wants to have a high ratio of profitable assets in their portfolio. But this isn’t an easy goal to accomplish. That’s because there are different factors that affect property market prices.
With property prices continually rising in Sydney, it’s important to know the factors that influence the change. Before you commit to any purchase or sale agreement, it’s important to undertake a property valuation in Sydney.
These are some basic factors that will influence the price changes.
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Interest Rates
One major property pricing determinant is the interest rates. When the interest rates reduce, the cost of borrowing reduces. This leads to an increase in the number of qualified buyers in the industry.
If all other things remain constant, a reduction in interest rates increases the debt appetite. As such, the demand for housing and other properties is likely to increase.
Lowering the interest rates may seem like a small factor in the economy. But it has the potential to influence property prices in the short term.
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Increasing Demand
In most cases, the interest rates only affect the owner-occupiers. But that’s not the only factor in housing. For instance, investors will buy rental property because they anticipate a rise in the value.
The presence of tenants demanding the property makes it worth owning. The increasing demand for rental property contributes to an increase in property prices. That’s why real estate is becoming a more stable investment by day.
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The Economic Conditions
The property market doesn’t operate in a vacuum. All the transactions are rife of the prevailing economic climate.
When the climate is good, there is room for trade. The prices of property will definitely increase.
The controlled inflation, low unemployment levels, higher incomes, and a booming economy makes Sydney a desirable living destination for many. With such favorable conditions, the pool of money from buyers and investors alike grows.
Unemployment exerts a lot of pressure on property prices in the country.
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Long-Term Growth Factors
Well, all the previous factors can change rapidly. A reduction in interest rates may increase the price in some few months. But despite this, there are some long-term factors that influence property prices.
An example of this being the current population in Sydney and its distribution. With an increase in population, the demand for housing and other properties will be on the rise. That means it’ll be inadequate to meet the market demands. The only remedy here to avoid market chaos is by raising the prices.
Other than population, there’s the construction factor. Well, the demand for housing is ever rising. But property construction in the area has been stagnating for years. The availability of outside barriers and national parks makes it impossible to start new property projects.
With the demand on its constant high and supply being stagnant, the prices are bound to increase.
The combined effects on these factors have led to an increase in property value across Sydney.
