Capital Value Changes
Calculating rental cash-flows
Several factors change property market values:-
1) Inflation
Inflation changes capital values of property but it also changes the price of the items to be purchased from the property sale.E.G. A property purchased for the same cost of a flash new RV and world tour will sell years later for the cost of the same flash new RV and world tour because the value these items also changed with inflation.
2) Interest rates
Falling interest rates increase property values.
Rising interest rates reduce property values because of the significant weekly costs
3) Renovations
Replacements and refurbishments increase capital values but their costs are often more and renovated items rust, rot and wear, thus reducing capital values over time.
4) Community impacts
● Land usage
● Services
● Rates
● Employment
● New residential building
● Population growth
5) Geographic changes
When fear of flood, fire, earthquakes and storm risks grow, costs increase, renters leave and values fall.
If incomes from Capital growth and rents do not provide enough money to meet all the costs then properties are sold and renters lose homes.
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