If you think that the primary determinant of a property’s value is the features it offers, you’re sadly mistaken. That’s not how supply and demand work at all. It’s not about how much the building materials cost. The price of a property is purely a function of the rarity of the space. If a house provides prospective buyers with something unusual – such as proximity to a subway station – the value will go up. If it’s miles from the nearest transport hub, the cost will fall.
In general, the market rewards rarity. The scarcer something is, the higher the price goes. This effect was the primary reason PPE got so expensive in March and April. Everyone wanted it, and factories couldn’t churn it out fast enough, according to https://www.who.int/news-room/.
Something similar is happening in the housing market in major cities. But there’s a difference – supply isn’t rising to meet demand. In fact, it probably never will. And for that reason, prices continue to increase – seemingly indefinitely.
For investors who understand the dynamics, this is a good thing. Essentially, the housing market is becoming decoupled from the rest of the economy. Prices elsewhere continue to fall as factories churn out ever more goods and implement better technology. Planning laws and limited space, however, mean that housing stocks aren’t changing at all. As the population grows, the demand for more household units does nothing but push up prices. And now it seems like the game could run indefinitely.
What Does This Mean For Investors?
For investors, this is good news. It means that once they get on the housing ladder, the value of their properties will appreciate continually, well above the rate of inflation. Thus, if you own property, you stand a much better chance of generating a positive return than at any time in the past.
If you hop on sites like https://lincolntowersnewyork.com/, you can see the sort of opportunities available. When buyers purchase properties in locations likely to see continued demand, it sets them up for massive returns from now on. This factor is why developers will often place giant residential towers next to subway stations. They know that people will want to locate there. And so it pays to build tall and cram as many units into a single development as possible.
Investors are already getting savvy to the game. Property prices in economically affluent areas have already seen a boom in asking prices. The same is now happening in places that seem as though they are about to become gentrified. Just take a look at what happened in New York once planners announced Hudson Yards. Residential rents and valuations skyrocketed.
Never Underestimate Location
When choosing property investments, always consider the location. It’s not usually about the property itself. The condition is mostly irrelevant. What matters is where it is. And that’s how you make your money. If you find a property in an area about to see a significant increase in wealth, you’re usually onto a massive winner.