Factors that Affect the Value Appreciation of Property

There are always five basic factors that affect the value appreciation of property. Find out which of them influence property value the most

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Buying property may be a daunting task for most Filipinos, but with the right guidance it can turn out to be a sound investment. Even if your real estate remains idle for several years, its value appreciation can be substantial given an ideal set of conditions.

But before you browse real estate sites or peruse classified ads in search of a cheap piece of property, it would be wise to brush up on your knowledge of real estate. Not every idle piece of land will appreciate in value. Some areas will have the same market price or even depreciate over time; it’s really best to have a checklist of factors that can help you make an informed decision and avoid a bad investment.

So how do you know which strips of land will eventually fetch good value appreciation? What factors usually influence the value of property? You may have heard of the age-old mantra “location, location, location.” This is true for the most part. However, according to a real estate expert, it is not the sole driver of value.

“There is a common cliché that when the question of property value is asked, everyone, including experienced licensed professionals, would simply say, ‘Location, location, location’,” says Emmanuel Bocaling, a licensed realtor since 1986 who has seen (and invested in) his share of previously uninhabited tracts of land in the middle of nowhere transform into thriving communities.

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“There are really a few more factors that should be considered,” he adds. “ When Filipino-American businessman Col. Joseph McMiking looked at the barren cogon-filled grass lands around the former Manila Airport, who could have envisioned that such emptiness would fill the needs of around 25 million Filipinos then? And yet when you look at those former cogon fields now called Makati, one can easily say, ‘Location, location, location’.”

Col. McMiking helped transform a vast piece of land in Makati after the devastation of World War II into the center of business and commerce that it is today. Under his guidance, Makati became the financial capital of the country, and the value of its real estate skyrocketed and continues to do so.

Makati’s Central Business District

“What Col. McMiking saw was just part of a vision beyond the emptiness,” Bocaling adds. “It was more than just ‘location, location, location’ that mattered.”

Bocaling, who once served as president of the Philippine Association of Realtors Board, believes there are a few things to consider when determining if the property you bought or are planning to buy can bring you a hefty return on your investment. Here, he lists several other factors that can influence the value of property.

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Demographics

According to Bocaling, the profile of people who will be settling down or doing business around your property is a good indicator of value appreciation. “The type of people [who] will use the property helps determine its value,” he says. “Their economic class, their activities or purpose for use of the property affect the value either in a positive or negative manner.”

Location

Consistently, this is a major consideration. “Of course, this is one factor that is always a factor,” Bocaling says. If it is close to schools, supermarkets, a business district, a hospital, and a church, the property shoots up in value. A self-sustaining neighborhood is always a good bet.

Vision of developers and local government units (LGUs)

The property developer, along with its relationship with the LGU, should always be considered. It goes without saying that it’s best to stick with those with a proven track record. “This is a factor that really decides the desirability of a piece of property,” Bocaling explains. He cites the example of NUVALI, Ayala Land’s prime residential and commercial development that straddles the Laguna towns of Sta. Rosa and Cabuyao. “Who would have ever thought [that it would develop into what it is today]?” Bocaling asks.

NUVALI, Ayala Land’s prime residential and commercial development

Economic activity trends

Commerce is also a good sign, Bocaling says. “Is the property in a Central Business District (CBD)?” he asks rhetorically. “[Is it a] highly residential community? A [small] condominium or a [major] condominium? Economic activity dictates greatly on property values. Obviously, the more activity, the higher the value.”

Political stability

It may sound obvious, but Bocaling says this is a must when talking about not just value appreciation, but any investment. “Without this, few things in this country would be of any value,” he says. A stable and predictable government creates a stable and predictable economy, giving value to investments made.

That seems like a solid list. But which of these five factors influence property value the most? To answer this, Bocaling lists his top three. “Per my own analysis, these three are the most important: political stability, vision of developers and LGUs, and of course, location, location, location.”

So the next time you’re thinking of investing in property, use this guide to help you spot the place that will give you the biggest value for your real estate investment. Is it a NUVALI house and lot for sale or a condo right in the middle of a CBD? Go out and look for your own piece of paradise.