It’s because location will tell you whether a property has current and future value or the potential to earn more as the location develops. So, whether you’re buying a home for the first time or exploring Phuket luxury villas for sale as a potential investment option, knowing why location is an important factor in real estate transactions will help you make sound real estate decisions.
Supply and Demand
The dynamics of supply and demand can vary greatly in different locations.
- In simple economic principles, a location with a limited supply that has the potential for growth usually has high demand.
- Prime locations, especially those that have top-rated schools, hospitals, and efficient transportation systems, have a high demand and higher rates.
- Locations with geographic constraints or those that prevent further development create scarcity that appeals to some property buyers and investors.
- Neighbourhoods where the lots have been fixed for generations can’t respond when demand increases due to job growth or population migration.
Appreciation Value
Location can have a significant impact on a property’s value over time. This is especially true for the land where a home or building sits.
- Properties in prime locations or in luxury real estate markets make a fine investment option because of the guaranteed growth over time. The building may deteriorate or age, but the land value will continue to rise.
- In a neighbourhood with good schools, a strong job market, and future development projects, the increase in property values tends to accelerate.
- A home built in a high-demand area will cost more in 10 years than a property built in a less desirable location, even if both are equally well-maintained.
- Most investors put their money in up-and-coming neighbourhoods rather than in locations currently known as the best to ensure growing returns as a location develops over time.
Safety Premium
When safety and security are guaranteed in a location, anyone would pay the price, no matter how high. There’s no price for peace of mind, after all.
- Look into a location’s crime profile and availability of safety programs. Areas with low crime rates and strong community safety measures often show higher appreciation and market resilience.
- Locations with declining crime rates or that have historically consistently low crime rates are considered premium locations.
- Neighbourhoods with active community-policing measures maintain better security and safety records compared to those that lack community-police partnerships.
Rental Income Potential
If you plan to invest in real estate to generate consistent income and positive cash flow, rental properties are a good option. The right location will ensure you find tenants and keep vacancy to a minimum or even zero. Thailand, for example, has become a favourite among digital nomads, making it ripe for rental investing.
- Look for properties in areas with a strong job market to attract working individuals looking for housing close to their workplace. Proximity to major industries or business hubs can influence rental income potential and occupancy rates.
- Check a neighbourhood’s vacancy rates. If it has a high vacancy rate or there are properties that have been sitting empty for long periods, steer clear of it.
- Find out if a neighbourhood has a good or bad overall reputation, as this can impact tenancy rates. Most people will avoid problematic neighbourhoods as much as they can. Only a few would dare take a risk, but only because of low rental rates.
Based on the above, it’s clear how location is a major deciding factor. If you want to benefit from Phuket’s thriving real estate market, contact Zest Real Estate (Oct).
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