Factors influencing price appreciation of an area

Property prices in an area are governed by various factors, some of which are intrinsic to that particular area while others are dependent on the current economic, social or political situation. Some of the general factors influencing property price appreciation in an area are Population growth, Demand and supply dynamics of the area, Inflationary trend, Home loan rates and Realty drivers in the area.

Population Growth

Growth in the population of an area directly influences the demand for residential accommodation in an area. This is not alone related to the local population of that area but also to the migratory population who relocate for education or employment.

Demand and Supply Dynamics

Property prices in an area generally go up due to the increase in demand for residences in that area. Moreover, if there is a mismatch between the demand and supply due to which supply of residential units is not consistent with the demand in that area, then there will be price appreciation. Also, demand for residences in an area is higher if buyers feel that living in that particular area has considerable benefits. The long-term prospects that the area holds also has a bearing on the demand for property in an area, which indirectly results in price appreciation.

Inflation

Inflation has a direct influence on price appreciation. Inflationary trends generally exist when there is an excessive amount of money in circulation, which results in a fall in its value. This results in the rise in prices of various commodities associated with the real estate sector. They include land prices, prices of construction materials, labour charges, legal building charges as well as various other charges related to the sector. However, inflation cannot be solely responsible for the appreciation of realty prices in an area. This is dependent on various other factors like the accessibility, the connectivity, the social and physical infrastructure and the availability of residential projects in the area.

Home loan rates

The interest rates on home loan also have a direct bearing on the demand for residential property in an area, and thereby on the price appreciation. Where there is an increase in the interest rates charged by banks on home loans, the demand for residential property decreases due to the increase in the total amount that buyers will have to pay. Similarly, if there is a decrease in the interest rate on home loans, the demand for residential property will be higher as home buyers will need to pay only a lower amount.

Realty market drivers

They are various other factors that increase the liveability quotient of a particular area and hence in overall price appreciation. They include factors such as:

·  Employment opportunities in the area. Good presence of office space including reputed companies.

·  Overall connectivity to other areas across the city.

·  Accessibility to various transportation facilities that include road, rail and air.

·  Social infrastructure facilities like schools, colleges, hospitals, shopping centers, entertainment facilities etc. being in the vicinity.

·  Physical infrastructure features like good roads, bridges, flyovers, dedicated water and electricity supply, playgrounds, parks and gardens being present

·  Zoning regulations being applicable to the area, whereby permission is not granted for constructing too many projects. This facilitates the presence of more open spaces and greenery in the area, which promotes healthy living.