www.rentagain.nz > viability > capital growth Capital Value Changes
Calculating rental cash-flows
Several factors affect property capital values:-
1) Inflation
Inflation changes capital values of properties, but it also changes the price of the items to be purchased from the sale of the properties. This effectively cancels out any benefit from inflation.Example: 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 cost of these items also change with inflation.
2) Interest rates
Falling interest rates help increase property values.
Rising interest rates help reduce property values
3) Renovations
Replacements and refurbishments increase capital values for a while but these slowly fall again (relatively) as rust, rot and wear begin to attack again over time.
4) Community changes
Changes made by councils and other businesses in the area affect property values. These changes may involve:-
● Land usage
● Services
● Rates
● Employment
● Building developments
● Population
5) Geography
Values change with fear perceptions involving:-● Floods,
● Earthquakes
● Storms
● Land subsidence.