Key takeaways
When looking for a new property, there are many factors to consider, including location, school zones, demographics, and even the number on the mailbox.
Location is everything when it comes to a property's capital growth. It should be within 20 minutes of shopping, business services, education, community facilities, recreational and sporting resources, and some jobs.
Property size, location, amenities and the suburb obviously contribute to a property's value, but the property itself makes up the rest. Garages, pools, backyards, air-conditioning, patios, and balconies all positively influence a property's value.
Interest rates can affect how much prospective buyers are willing to pay for a property. Higher interest rates can put downwards pressure on property values, while lower interest rates can entice borrowers to buy.
When it comes to your investment property value, there are many factors that weigh into the final number. Understanding these factors helps you make the best financial decisions.
Whether you’re a home buyer or an investor, when you’re looking for a new property there are so many things to consider.
Determining the best property to buy isn’t as easy as picking the nicest-looking house in your local area.
From location to school zones, demographics, and even the number on the mailbox, there are many factors that affect what a property is worth.
Here are 11 factors that can push values up, or down.
1. Location
As I often say, location does 80% of the heavy lifting of a property’s capital growth.
After all, not all suburbs are created equal.
It seems that since those terrible days of COVID lockdowns, people love the thought that most of the things needed for a good life are within a 20-minute public transport trip, bike ride or walk from home.
Things such as shopping, business services, education, community facilities, recreational and sporting resources, and some jobs.
Now, the ability to work, live and play all within 20 minutes reach is the new gold standard desirable lifestyle.
Some suburbs will always be more popular than others, some areas will have more scarcity than others and over time some land will increase in value more than others.
That’s why it’s important to buy your investment property in a suburb that is dominated by more homeowners, rather than a suburb where tenants predominate.
And you’ll find suburbs where more affluent owners live will outperform the cheaper outer suburbs where wage growth is likely to stagnate moving forward.
In general, the more established suburbs with better infrastructure, shopping, and amenities tend to be close to the CBD and the water and that’s where the wealthy want to and can afford to live, and they’re prepared to pay a premium to live there.
The rich don’t like to commute.
Overall, by focussing your research on what those often overlooked owner-occupiers are doing, you may just find an investment that outperforms the market and delivers strong value and growth over the long term.
2. School zones
The location, amenities, and transport are important factors that affect a property's value.
But, did you know that state school zoning can also have a huge impact on local property prices?
That’s because some people are willing to pay a significant premium to be located within some well-rated primary and secondary school zones.
Students who live inside the zone must be accepted into the school, and while parents can apply from outside the boundary on special grounds (such as having siblings at the school, or access to a certain sport, language or program not available at other schools) there’s every chance they’ll be knocked back.
Competition for places in preferred school zones has pushed property prices sky-high.
And with elite private schools around the country costing parents up to (or in excess of) $41,000 per year, per child, it’s understandable that top-performing public schools are in high demand.
In fact, recent Domain data shows that property prices in some school catchment areas jumped as much as 45% in 2021 as many parents are willing to fork out hundreds of thousands of dollars to lock down an address that guarantees their child entry to their chosen school.
3. Demographics
The population and demographics of a suburb have a significant influence on a property’s value.
For example, if you live in a family-dominated suburb, three and four-bedroom homes will be more expensive.
While in CBD areas, one and two-bedroom apartments will be more in demand from workers and students.
4. Street appeal
Did you know that street appeal can positively impact the value of your property?
It’s obvious that streets with extravagant views in high-profile areas create a certain type of premium.
But properties on streets with low noise, trees, and maintenance also tend to fetch a premium.
Popular streets are often quiet, away from busy roads, railway lines, flight paths, and other negative features.
They’re tidy, clean, and well-maintained streets with good condition paths and roads also make the street far more sought after.
In fact, research into the effect of street trees on property value found that tree-lined streets increased median property prices by up to $16,889.
- Also read:Melbourne property market forecast for 2025
- Also read:Sydney property market forecast for 2025
- Also read:Brisbane’s property market forecast for 2025
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – November 2024
- Also read:Avoid these 12 reasons Property Investors Fail to build a Multi Million Dollar Property Portfolio
5. Property size
Location, amenities and the suburb obviously do some of the heavy liftings for a property value, but understandably the property itself makes up the rest.
One key indicator for market value is the price per square metre – the total sales price divided by the property’s area.
So, obviously, the bigger the property, the more valuable the property is.
But wait, there’s more.
Not only does size determine a property’s value, but also how much of the space is usable space.
Equally, having a garage or a dedicated storage cage can also add a premium, particularly for smaller properties.
Also, things like garages, pools, backyards, air-conditioning, patios, and balconies all also positively influence a property’s value.
6. Age and condition
It goes without saying that property in good condition would fetch a higher value than one the same size in poor condition and in need of major renovations or repairs.
Also, buyers would often rather buy a newer house that is well maintained than an older one that needs major renovation.
7. Renovation potential
Talking about renovation, while recently renovated properties will usually sell at a higher price, if there is scope for a buyer to improve a property, it could also increase its value.
This is especially the case for properties with a larger land size that would allow for additions like a new swimming pool, extension, or deck.
8. Planning and building regulations
Property construction and (sometimes) renovation or additions require building regulations and planning permission.
Failure to adhere to these regulations could result in a property being demolished.
If regulations make it difficult to build in a particular area or if for example, the property is in a heritage-listed area that restricts new development, this can have an impact on the value of the property.
9. Investment potential
If a home can be renovated to add value and later sell then that becomes attractive to a group of investors.
Similarly, investors will be drawn to properties that are in an area tipped to gentrify or rise in value, as these will be popular among renters.
Investment-grade properties generally follow these criteria:
- Appeal to a wide range of affluent owner-occupiers
- Are in the right location
- Have street appeal, a favourable aspect or good views.
- Offer security - by being located in the right suburbs as well as having security features such as gates, intercoms, and alarms
- Offer a secure off-street car parking
- Have the potential to add value through renovations
- Have a high land to asset ratio
10. Numbers
Did you know that the number 13 can negatively impact a property’s value?
Many buyers would avoid purchasing a property at number 13 to avoid superstitious bad luck.
Equally, the numbers 8, 6, and 9 are considered particularly lucky in Chinese culture for wealth, good fortune, and prosperity.
So the demand for properties with these numbers could easily drive values higher.
11. Interest rates
The prevailing economic conditions including interest rates can play a big role in how much prospective buyers are willing to pay for a property.
That’s because every rate hike can equate to hundreds of dollars extra in monthly mortgage repayments, which means people may have tighter budgets when looking for a property to buy.
And this can put downwards pressure on property values.
And on the flipside, as we have seen over the past 2 years, dramatic interest rate cuts can entice borrowers to buy, creating a surge in demand and therefore pushing prices up.
The bottom line
When it comes to your property value, there are many factors that weigh into the final number.
Understanding what affects the value of your investment property means you’re better placed to make the best financial decisions when it comes to renovation, improvements, or even selling.
Equally, the information also helps you to buy the best investment-grade property available to suit your needs.
After all, you want an investment property to tick most, if not all, of these boxes.
