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Seven Keys Factors that Drive Real Estate Values
1.Mortgage interest rates
Low interest rates allow a greater proportion of renters to become homeowners, which in turn can lead to an increase in home sales and therefore push prices higher
 
2. Net Wealth Effect Increase in Disposable Incomes
This is one of the most important indicators. If a town’s average disposable income is increasing faster than the national average real estate prices are poised to do the same thing.  Key Indicators: a) increased average income; b) decreasing income tax rates; c) increasing retail sales.  Be wary of areas where demand is driving values upward while the average income is remaining flat.
 
3. Increased Job Growth and Migration
It pays to read the news regularly about areas you invest in.  Be on the lookout for announcements of new jobs, major expansions, crime reports or new employers moving in.  Find areas where the population is growing faster than the average and gaining a good reputation. Also look for Immigration- people from other countries moving into the area, and Intra-migration- people moving from other parts of Canada into the area.
 
4. The Real Estate Doppler Effect
It is often much more profitable to invest in areas surrounding the boom than to buy property in the heart of it.  Use this factor to identify areas that are poised for a strong increase in demands.  Some areas, outside of areas that get the effect, usually take 6 months to catch up.  Look for areas where redevelopment is occurring.  Older untouched neighborhoods in these areas can sometimes be hidden gems that aren’t immediately affected by a boom..
 
5. Local, Regional and Provincial Political Climate
Business friendly politicians generally equal real estate friendly investment areas.  Look for regions where development is wanted, not shunned.  Look for areas with forward-looking economic development offices where they sell the area to potential employers. Progressive towns attract business while other towns lose it.
 
6. Critical Infrastructure expansion
a) Look for planes, trains, highways, sewers, land annexation or expansion plans. Trains and rapid transport are huge .
b) Increased cost of labor and materials This occurs in areas of high in-migration and infrastructure expansion, labor and material costs will increase dramatically.  The value increases occur around six months after the cost of new building increases.
 
7. Areas of gentrification and renewal
This is best defined as areas that are moving up from one economic class to the next, often described as “tough, yet funky”.  In these areas, you’ll witness a mix of run down to well-kept, recently fixed up properties.   The local perception is the hardest to change, so often locals miss the opportunity.  Insight:  Look for Doppler Effect gentrification areas.  Never be first into an area you believe is going to be in transition.  Renewal areas take more due diligence but are worth the effort.
 
     
     
     

 

Konstantin Kichtchenko Sales Representative Right at Home Realty Inc., Brokerage 416-391-3232 1396 Don Mills Road B121, Toronto, Ontario, M3B 0A7