The primary focus of a home buyer is the immediate benefits they get out of owning a home. This includes creating a family environment in the space, finding a comfortable space that your family can live and enjoying the new space. But you have to consider the financial aspect of this which includes the concept of capital growth.
Capital growth refers to
How your how your property value can increase over time and your buyer’s agent will help you with understanding this with a capital growth calculator. This can help you determine the long term financial benefits of owning the property. You can compare the capital growth by comparing the current market value of the property to its purchase price. There are many factors that can contribute to this. Market trends have an impact on property values which include interest rates, housing market conditions and economic trends. If you are looking for a house in a booming economy with low interest rates, the property values will increase. The location of the property will also lead to higher capital growth. This is a result of areas that have good amenities, transport links and schools. Location has a big impact on the future value of your property. You can also improve the value of the property over time by having property improvements. You can upgrade the house or carryout renovations so that the appeal and functionality of the house is improved. This can be landscaping, kitchen or bathroom remodels, energy efficient upgrades etc.
The balance between the number of properties
That are up for sale and the number of buyers looking for property will have an effect on capital growth as well. Property prices will go up with a low supply and high demand. You need to understand capital growth in order to maximise the financial benefit of your property. When your property value increases, your home equity will go up as well. This is the difference between the property market value and what you owe on the mortgage. When home equity increases, you will have more opportunities to build wealth through home improvements, future investments etc. You will have better refinancing options as well when you have more equity in your home. This will help lower your mortgage rate.
As a real estate investor,
You can consider capital growth as a key factor to evaluate return on investment in a rental property. You will buy a property expecting that its value will go up with time and capital growth can lead to high resale values so that you can enjoy a substantial profit when selling the property. An increase in rental demand is seen in properties that experience capital growth and this will lead to higher rental income with time as well. When the property value increases over time, this will contribute to your net worth and you can consider this as a financial cushion for future needs. A home is a significant asset that a person can own and whether this appreciates in value due to capital growth, it will contribute to your overall financial stability and health.