Location: The 3 “Rules” of Real Estate

Eriks Draiska
Published on June 27, 2018

Location: The 3 “Rules” of Real Estate

Real estate has three primary rules:

  1. Location
  2. Location
  3. Location

When something has to be repeated three times for it to sink in, you know it’s an important issue. And, when it comes to determining a home’s value – now and in the future – location is king.

When real estate agents, lenders and appraisers talk about location, however, they aren’t just referring to whether the home sits on a sandy beach. There are many aspects they take into account when determining how a home’s particular location impacts its value.

Commute times

Studies often show that the most inexpensive housing markets have the longest commute time.

Each year, the average Australian spends over 264 hours commuting. One thing that can make a huge difference is the suburb you choose to live in.

Depending on where you are in Australia,  just hopping a couple of suburbs over can drastically shift your commute times or save you tens of thousands of dollars over the course of your life. And interestingly, while a house in one suburb might be cheaper, it may cost you more in the long run when you take the overall price of commuting into account.

If you want a cheaper home in an inexpensive market, plan on a long commute, because this aspect of location – proximity to business and retails centers – makes for higher home values.

The availability of public transport also impacts.

Proximity to schools

Parents of school-age children naturally gravitate to neighborhoods near quality school districts. These “in-demand” neighborhood homes, in turn, boast higher values than homes located near lesser-quality schools.

Is there a correlation between property prices and school catchment areas?

The short answer is yes – with all data pointing to a direct correlation between property price growth and in-demand school catchment areas. Families want the best for their children, and top of the list for many is a top-notch education. What is it worth?

According to Domain’s School Zones Report, properties in prime school catchment areas can sell for up to 10 to 15 percent more. The report found that property price growth near top schools was significantly higher than the average growth rate of the city. Other sources report anywhere from a $50,000 to $150,000 premium for a home in an in-demand postcode.

The bottom line is that a decent home in a good school district will hold its value better than a comparable home located in a poor school district.

Homes located near open space are worth more

If your house is situated within 300 metres of a playground it could be worth up to $35,000 more according to a Melbourne, Australia study.

According to new report Impact of playgrounds on property prices: Evidence from Australia, homes near undeveloped green spaces are missing out on tens of thousands of dollars.

The research looked at houses and units and found the effect of playgrounds on properties vary from about $15,000 to $35,000, is larger for houses and correlated with distance.

Properties within 300 metres of a playground sell for about $20,000 higher than those that aren’t. If the figure is restricted to just houses the average added value is $32,073.

Speaking at the Economic Society of Australia’s ACE Conference in Canberra, the lead author of the report, Dr Syed Hasan from Massey University, said parks have an incredible benefit for children and families, which has contributed to the rise.

“Playgrounds constitute an essential part of urban livelihood in Australia,” he said.

“A nearby playground allows young children to engage in healthy physical activities that are not otherwise available to them at home.

“In addition, playgrounds facilitate social interaction … altogether playgrounds contribute to improving the living standard of neighbouring residents.”

The neighborhood’s proximity to commercial amenities

Contrary to popular belief, a new shopping center developed within a community does not negatively impact the value of the homes in closest proximity.

In fact, although a new commercial development does cause an immediate drop in value for homes closest to it (within a 1.2km radius), those values tend to rise by 1.3 percent each year.

Within four years after development, those homes have regained the lost value and more, according to Jonathan A. Wiley, Ph.D. with the Department of Real Estate at Georgia State University.

So, don’t let news of an impending commercial development in the area scare you away from the home of your dreams.

Other location attributes, such as crime, jobs and housing inventory all impact an area’s home values, but location is chief.

Got questions, comments or feedback? Email [email protected]

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Like most things in life, these are recommendations only. It is not legal advice, it may or may not suit your own circumstances and you may need to make your own additional enquiries.
Regards Eriks & Team 
Plaza Real Estate 

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