A Beginner’s Guide to Home Appreciation

November 9, 2021
home appreciation Woolloomooloo house for sale

There are so many things to consider when buying a property and appreciation is just one of them. No, we’re not talking about “appreciating” your home for what it is, we’re talking about whether it’s going to increase in value over time. And you want your home to gain value, that’s one of the potential great benefits of owning your own home. 

People put their money into real estate for several reasons. First and foremost, if you’re an owner-occupier, it puts a roof over your head. But there are also tax advantages, low volatility, and excellent return rates. In an appreciative house price environment, you could add to your wealth.

So if you want to benefit from these factors, it’s important to verify that the home you’re purchasing will appreciate over time. Unfortunately, there’s no sure-fire way to know your home will gain value over time. There are home appreciation calculators online, yes, but they can only predict so much. Both the property itself and the real estate climate are unique and constantly evolving. It’s difficult to definitively assess what the future will look like.

But there are a few elements that might tell you if a home will appreciate over time. So before you make the leap, make sure you’ve considered these.

Signs of Potential Home Appreciation

home appreciation guide location
Soho Listing @ 511/6E Cowper Wharf Roadway, Woolloomooloo, NSW, 2011, Australia

The home is in a good location

Location, location, location. Trite but true. If you’re looking at a home in a neighbourhood that’s already popular, chances are, it’s because it’s nice to live there. Which means the home appreciation potential is strong. How do you know it’s a good location? People are usually attracted to things like:

  • Good schools
  • A transportation hub and/or in easy access to public transport options
  • An “up and coming” neighbourhood
  • An area that has infrastructure plans in development (housing, medical, malls etc.)

The property is in a desirable location within the neighbourhood

Let’s say you’re in between two properties within a neighbourhood. One is nested in a cul-de-sac and the other is closer to a busy intersection. Most of the time, the quiet, corner situation will be in higher demand. Bear in mind that many buyers will be families, and wouldn’t want to live close to traffic where it’s not only more dangerous for the kids, but noisy from traffic. 

The property is already valuable

Rule of thumb: Over time, land appreciates and buildings depreciate.

If you take away the apartment building or the house, what’s left is the land. And land will most likely appreciate better than buildings. Buildings and permanent structures age and get run down over time, whereas land stays the same. It’s the reason why properties on a waterfront always gain value.

Soho Listing @ 511/6E Cowper Wharf Roadway, Woolloomooloo, NSW, 2011, Australia

You flipped the property

When you take a fixer-upper and invest time and money into making it beautiful, you’re flipping it. And flipping comes with many pitfalls. It all seems fun and easy on those Netflix shows, but in reality, things always go wrong, and you end up paying for more than you anticipated.

However, if the property doesn’t need too much work and the renovations can be done over time, you’ll likely get a better return on investment. 

The local market is strong in home appreciation

Your home appreciation likelihood is better in a strong market. So when you do your research and speak to a real estate agent, make sure to ask which markets are volatile, and which ones are more consistent. They’ll be a reliable source of information. They can help you evaluate trends over time so you make the best decision. 

Key point: strong local housing markets are usually within close distance to institutions which employ many people, like universities.

If you haven’t found your dream home yet, we can also help you out in that department. Browse our search page to check out some amazing listings available right now. But don’t just stop there, download our app to get the full Soho experience. Just remember to shortlist or swipe left on our listings so we can send you others that better match what you’re looking for.

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