Home Buyer & Home Seller Guide

Property prices, like any commodity or investment, constantly fluctuates due to a number of factors and this can often prove frustrating to sellers wanting to get the best price for their property. Similarly, the changes in property prices can also affect new home owners who may not be able to afford a property that they had planned to purchase once property prices increase. Understanding some of the factors that contribute to property price trend may assist you in timing your house sale or purchase.

Supply and Demand

Supply and demand is the cornerstone of property price trends and is a simple concept that applies to any industry. If there is sufficient availability of properties to meet with demand, then chances are that some sellers will cut prices in order to be more attractive to prospective buyers. This trend will spread and with time, property prices decrease. Similarly, in a situation when demand outweighs supply, where there are many potential buyers and too few properties available on the market, the property prices will increase as sellers can ask higher amounts for their property, knowing that buyers are eager or desperate. Supply and demand may impact on property price trends on a national, regional or even local level so while supply may outstrip demand in one area, the opposite may be true in another suburb. All other factors relating to property factors are essentially an aspect of supply and demand even the cliché “location, location, location”.

Creditworthy Buyers

At a time when the global credit crunch is affecting financial institutions, they may be less likely to lend out money. Since financial institutions do need to derive an income from the money they lend, yet want to minimize their risk by being exposed to buyers who may default, they change their criteria for lending. They may only lend to buyers with a higher disposable income or even limit the category of properties that they are willing to finance. Whereas a poor credit rating in the past may have still allowed a buyer to get finance, through careless money lending policies of some institutions, with the global recession, not many banks will continue to do so. Less buyers who qualify for a mortgage means lower demand which ultimately lowers house prices.

Crime, Facilities & Amenities

There is no denying the fact that properties in a ‘bad’ neigborhood sell for less than those in a plush, upmarket area. Incidents of crime, poor infrastructure of the surrounding area, lack of facilities and services will reduce property prices. Similarly, an area with all the necessary facilities and amenities, with a low crime rate and a good image will usually increase property prices. It is important to bear this point in mind, especially when selling. Many sellers hold out for as long as possible to get the best possible price on their property, only to have a shocking crime or wave of urban decay suddenly causing a dip in prices.

Additional Costs of Owning a House

Another important consideration when selling your home is to factor in the costs like property taxes, insurance, gas and heating expenses and so on, which buyers may take into account when deciding on the feasibility of purchasing your property. A middle class home in a cold area may actually sell for less at times, due to the high cost of heating. Even transport costs of getting to and from the nearest shopping mall, school or entertainment area will be an issue for prospective buyers, and if they do not find the property conveniently located or if it will cost them a substantial amount to access these facilities, they are not likely to want to purchase a property in the specific area. Less demand once again translates into lower property prices.

While many sellers enter the market believing that the house valuation price that they were provided is the ideal selling price of their house, identifying and understanding property price trends will allow you to better understand why your house may not be selling. If you are trying to increase your profit by selling your own house, rather than opting for an estate agent, then it is important to do your homework about potential factors that may affect house prices and find ways to counteract it, if possible. If these factors cannot be altered, then look at other methods to increase your property’s value like interior renovations before selling your house. Eventually, if none of these changes improves the property price, then you should consider settling for the money you are able to get immediately rather than waiting longer and watching property prices drop further. Similarly, if you are aware of changes and developments that will definitely increase your property’s value, then you should wait until you can secure a better selling price.