Oct
2013
Property value is governed by a few fixed factors. Here are some of the factors which influence the value of your property investment.
In basic terms the value of your property investment is directly related to the interest rate against your bond, which is linked to the Reserve Bank Lending rate.
This form of investment should be viewed separately to the value of your property directly as the specific property value is driven by supply and demand. Thus, your property value will then be determined by the value of the bond against your property. If interest rates are low then lending money is cheaper and in turn relates to more disposable income in your pocket. This means the bonded value of your property would be lower. Higher interest rates mean a higher bond value but less disposable income. This relates to a decreased pool of potential buyers within a given income bracket.
There is as a trend within the property market which influences the overall picture of what is happening in the property market. Low to middle income families make up a large portion of the property market. This is where most of the movement occurs within the property market, and is also a major contributing factor in what is reflected as market trends.
Higher priced properties do not show as much movement as the middle and lower income groups, and the growth in this segment is thus not as significant as the market is tested by supply and demand. What this means is that, when a property is sold there are costs incurred like transfer fees, bond cancellation fees, bond registration fees which all form part of the bond raised against the property. This in turn establishes a value to that property, along with a municipal valuation. When a property is sold, the seller tries to recover as much of these costs through the sale of the property. Add to this the interest rate, supply and demand and disposable income and you have a fair indication of how the market is performing.
