How to Find Areas
with High Value-Added Potential
One question that often plagues home buyers is, “Is this a good time to enter the market?”
From the analysis of PIA’s home buying philosophy, the aner is “yes” or “no”,
Neither of which is correct.
Ordinary & Extraordinary
Value Added
PIA Home Buying Philosophy categorizes value added as “ordinary value added” and “extraordinary value added”. This means that traditional residential neighborhoods have “ordinary appreciation” due to supply and demand and inflation, which averages 3-6% per year. The “extraordinary value-added” refers to a high level of property appreciation in a certain area due to future new developments, new transportation, new supporting facilities that drive the inflow of population and employment, and increase in income. The transformation brought by “new railroad station”, “new city development area”, “new district government planning” is the most typical. For example, in a remote area, house prices increase by 4% per year for 10 years, accumulating to about 50%. In another high-growth area, annual growth over 10 years nearly doubles that amount. In contrast, missing a peak growth opportunity is equivalent to missing out on 10 years of cumulative appreciation. In summary: By knowing how to recognize “extraordinary growth areas”, every purchase is more explosive.
Looking at a given period of time, we can see that the percentage of appreciation varies, and that the percentage of areas that remain robust in the face of a number of negative factors is much higher than in markets where the percentage is high and volatile, or even in what we call “Stable Appreciation Zones”.
In fact, it is important to pay attention to the “potential” of a district as a high-growth area. The potential for growth does not mean that it will happen in the future, but it is clear that a set of real estate “the same conditions” the reason for the appreciation of factors, for many ordinary people, it has two functions:
- To guide the investment strategy, to assess the area ‘good’ into the number, if a certain area depends on a very special circumstances to achieve growth, or even we call it “stable appreciation area”. If a district has to rely on very special circumstances to achieve growth, or the region still has major limitations in the future, then the “potential” is greatly reduced.
- Avoid making bad decisions. People often ignore the potential of the region, buy in today’s “cheap” but the future development capacity of the region is not enough, the results of the future gains are also lost.
Area of the “good” and ‘bad’
“Why the more expensive area will have more expensive potential?”
People have different answers. Some people see major supporting projects and believe that the region has a promising future, while others feel the potential for growth due to population density and activity. Some people may not be able to tell the reason, but simply “feel” it.
People often say “good side” and “bad side” are actually similar.
- From a comprehensive point of view, there is a difference between “good” and “bad” caused by personal background and perception. People tend to draw conclusions based on their own economic and cultural backgrounds and perceptions. The font may not be good for the side that the third thinks is good; the font may be bad for the side that the third thinks is good; the font may be good for the side that the third thinks is bad.
- When evaluating an area in terms of specific factors, each person will draw different conclusions due to his or her preference for each factor. For example, to three should be good for Area A because it is quiet; a font may be bad for Area A because it is not easily accessible.
Three Differences
The actual “goodness” and “badness” of an area, as well as its perceived “goodness” and “badness”, are reflected in the ‘goodness’ and “badness” of an area. The actual “good” or “bad” of an area, as well as the ‘good’ or “bad” of people’s perception of it, are reflected in the price of housing. From an investment point of view, regardless of whether you buy on the “good side” or the “bad side”, you need to focus on the future, and PIA’s philosophy is that investment is about investing in the future, and whether or not an area has an “extraordinary value-added” depends on the following three differences. Whether an area has “extraordinary value-added” depends on the following three differences:
The actual “goodness” and “badness” of an area, as well as its perceived “goodness” and “badness”, are reflected in the ‘goodness’ and “badness” of an area. The actual “good” or “bad” of an area, as well as the ‘good’ or “bad” of people’s perception of it, are reflected in the price of housing. From an investment point of view, regardless of whether you buy on the “good side” or the “bad side”, you need to focus on the future, and PIA’s philosophy is that investment is about investing in the future, and whether or not an area has an “extraordinary value-added” depends on the following three differences. Whether an area has “extraordinary value-added” depends on the following three differences:
1.The difference between the present and the future**: If an area has positive changes (e.g., employment, transportation, shopping, environment, etc.) in the next few years due to the government’s or a large company’s plans, then it has the potential for “extraordinary appreciation”. For example, the opening of the Twin Highways and Highway 5 stimulated real estate in the area. Home buyers need to gather information to determine future plans and be willing to invest before changes occur.
2.Difference between perception and reality**: People’s perceptions of areas often lag behind reality. For example, many people think that it takes more than an hour to drive from LIVERPOOL to the CBD, but in reality it only takes 30 minutes due to the opening of Highway 5. The process of eliminating the discrepancy between perception and reality is the process of “over-adding value”. It is recommended to make a site visit and compare the impression scores of others. If the difference is significant, the area may be a good place to invest.
3.Difference between the previous wave and the next wave**: People like to follow the trend, forming a “wave effect”. For example, Sydney’s Eastern and Northern Districts increased in value quickly in 2000, and the Western District overtook them in 2002. When prices in a particular area become unattainable, people will move to a relatively cheaper area. This effect can also be seen between a HOUSE and a UNIT.
Finding “extraordinary value-added” areas requires a calm and rational analysis, but individual home buyers are often bound by emotion and experience.
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