When you are looking for a new home or starting a home renovation, it is important that you understand the factors influencing the value of the real estate of your interest. This is necessary because most Filipinos are required to have a homebuyer’s loan or to refinance loans in the Philippines when commencing with home buying or renewal. Moreover, all providers of loans in the Philippines, whether they are specialist loan providers or banks, require a guarantee of repayment.
For the majority of homebuyers, purchasing real estate is an asset, which could be used to keep a roof over their heads, as an investment for resale, or to gain rental value in the future. No matter the purpose, you, as a potential home-owner, should be mindful of some factors before taking out loans to purchase or upgrade a home.
The appreciation of property value is a benefit that investors like to see. However, it is vital for you, the loan holder, that the property doesn’t depreciate below the value of your loan. Banks and loan providers err on the side of caution when providing a home loan. This is done so that if the worst was to happen and the loan becomes left unpaid, they can be sure that through repossession of the property, full repayment of the loan can be ensured.
To aid your decision-making process, listed below are a few factors that can affect the appreciation or depreciation of a real estate investment.
1. Location
Everyone has heard the axiom “location, location, location”, and the reason it is such a prevalent cliché is because there is truth behind it. Proximity to employment centers, medical facilities, shops, and schools is a determining factor for many families and young couples when buying a home. Proximity to a wide array of local amenities and good transport links increases the value of your potential property.
2. Geographical Stability
This is a condition specific to areas of geographical or geological instability. Areas that are prone to the effects of natural phenomena, such as flooding, tsunamis, earthquakes, or volcanic activity, are poor choices when buying property. You would be considering the aspect of your family’s safety, in addition to your loan viability and your insurance costs.
3. Age and Condition
The age of a property doesn’t automatically reduce its value. However, the condition of a property makes a huge difference. An old but well-maintained property can achieve a valuation that is the same as that of a new build of equivalent specifications; sometimes, even higher.
Keeping your potential property well-maintained will keep its value high. When you take out home loans in the Philippines, you should remember that the property must retain the level of valuation at the beginning of your loan, or a higher level of valuation.
4. Size and Improvements
The size of a home affects the initial value of the property. However, making poor renovation choices will cause your potential house to depreciate in value. Increasing the number of bedrooms and bathrooms is a good move to increase the value of your home, whereas removing walls and facilities or reducing the number of bedrooms is not.
When you are approaching a provider of loans in the Philippines for a home improvement or refinancing package, you should address how much the modifications will increase the value of your potential or existing property. The benefit should be equal to or more than your loan.
5. Population Movement
In our country, population densities move to areas that are more attractive. This is a slow process and can be difficult to predict or identify. However, you should understand how this phenomenon may affect the value of your potential property.
If the employment hub of a city moves from the center of the town to the outskirts, half of the city will have to travel farther to work, reducing the value of a real estate property in terms of its ‘proximity to employment hub’ factor. The other half of the city in turn receives a boost to their property values for being closer to the employment hub.
Growing cities grow that envelop neighboring towns and villages can have both a negative and a positive effect on properties within the area. For development purposes, land will be in demand and will commend higher value. However, homes in the area may depreciate because the development planned isn’t compatible with a residential area.
6. Legalities, taxes, urban zoning, etc.
Taxation zoning, government development, and economic stability play a role in the longevity of real estate. Changes to zoning within a town or a city can affect the value of a property.
Increased taxation in the center of the city will decrease the value of residential property in the area, making it cheaper for residents to live outside the center and commute.
Likewise, rezoning part of an area previously classed as residential to an industrial development may cause a decrease in value of adjacent properties.
Conversely, this could also increase levels of property value by introducing a new employment hub.
7. Surrounding area
No one can predict the future, but when you are buying property, you should pay attention to the surrounding area. Homes built in developing areas are subject to the whims of the developers operating in the vicinity. Paying close attention to the developments that are in motion (or those planned) for the areas adjacent to your property will be a key factor in determining the increase or decrease in value of your real estate investment.
These are just some of the main factors that can affect the longevity of a real estate venture. It is essential for you to pay attention to these factors when considering taking a loan to finance a home. The current value of a property is only the first step in deciding whether or not it is a worthy investment. Your loan provider will also look into the long-term viability of the loaned money secured on your potential property. Therefore, it is always best to be informed.
Kash Martinez, understands the intrinsic attributes of making excellent content that suits the needs of every business especially when it comes online financing. She can conceptualize and implement marketing plans, explores profitable B2B opportunities and then absorb Loan Solutions PH services.
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