Whether we like it or not, the cost of things increases every year. While this is frustrating in most situations, it is a huge benefit when it comes to the value of your property. Every year, your property appreciates, i.e., its value increases, so typically, you can sell it for more than what you bought it for.
We will break down everything you need to know about property appreciation so you can make the best financial decisions for your house or portfolio.
When housing costs rise due to general consumer inflation, it affects the entire market – sellers, buyers, tenants, and landlords. Hence, it's in your best interest to understand market fluctuations.
At the end of 2021, South Africa's national house price appreciation rate was reported as 4.57% for the year. Remember that national averages indicate expanded market trends and not detailed local information.
Two thousand twenty-one reports indicate that provincial inflation rates are 4.7% for Gauteng, 7.7% in Eastern Cape, the Western Cape at 7.1%, and KZN at 5.5%.
Nevertheless, each region varies, and it's advisable to obtain specific information from a local real estate professional to make informed decisions about buying, selling, or renting.
While provincial and national averages typically provide a comprehensive insight into revenues investors expect nationally, they still indicate property value in smaller markets.
National and provincial averages can indicate to buyers how much more a property will cost a year into the future. It can predict a reasonable and fair annual rental increase for tenants and landlords.
Currently, prices of low-value properties are outgrowing the high-value sector, and you'd be wise to consider properties in areas where house prices have historically beaten consumer inflation.
As a seller, you may be better off listing your home for sale when housing appreciation remains below consumer inflation for extended periods. The property markets usually fluctuate, and waiting it out does not mean you won't fetch your desired price when the time is right.
What Is Property Appreciation?
Simply put, it's how much your property increases in value over time, and you'll want to make sure you benefit:
Provided demand remains high in your local market, you can ask a higher price for your home and make a better profit.
In a strong market where average sales prices are higher than what you paid for your property, you enjoy more equity. Equity is the current market value of the property minus the outstanding mortgage. You immediately have equity when you put down a deposit on a home loan.
Good Indicators That a Property Will Appreciate
Although there are no hard and fast methods to determine that a property will indeed appreciate, however, there are always signs to indicate a home will increase in value over time:
Location sounds like a cliché, but it will always be a critical indicator. A good location will always be in desirable neighborhoods, for example, areas with excellent schools and where development of the area is highly likely.
Because land always appreciates more consistently than the buildings on it, some properties, for example, with beautiful views, are likely to see better appreciation irrespective of the structures on it.
Luckily there are ways to make sure your property increases in value, such as making intelligent and smart upgrades that do not increase its value to more than the average value of properties in your area.