Will my house increase in value?

Of course no one, not even the most experienced real estate agent, can answer that question categorically. But there are a number of factors which enable us to predict which areas are more likely than others to show an increase in median prices.

Location, one of the most crucial factors in a property purchase, is the most obvious. This ranges from the street the property is in and its location in that street – for example, is it at the quiet leafy end or near a noisy main road? – to the location of the suburb itself. Factors such as its transport links, infrastructure such as schools and shopping will play a part.

Changes in these can have a bearing on property prices and whether homes in an area increase in value. For example the extension of a railway line or other improvements in public transport, zoning changes, the building of a new school or improvements to a shopping centre can all make a property more desirable to potential buyers.

The state of the property market also has a bearing. Increasing house prices and affordability issues have been good news for some middle and outer suburbs and for regional centres within commuting distance of Melbourne. As the price of property in suburbs close to town has risen, buyers have looked further out and the prices in those adjoining suburbs have risen.

In towns such as Castlemaine and Kyneton prices have increased as families, priced out of Melbourne, have bought into the area. And generally the properties which have increased the most are those close to the station, although other factors such as character features and the quality of the home also have a bearing.

Competition has an impact on property prices. At a time when interest rates are low – and of course at present they are at an historic low – there’s often more competition for homes, and buyers will often bid at higher levels for properties.

While market factors are beyond the control of vendors, owners can improve their property before sale. Sometimes relatively inexpensive improvements can make a big difference, but it is important to obtain advice before spending time and money. Overcapitalising a property by spending more than can be recouped at sale, or pricing it beyond what people are willing to pay in that area means it is wasted.

But it is important to emphasise that buying property is a long-term investment. While some people are lucky enough to buy and sell in a relatively short period and make money, REIV data shows that there are excellent capital gains to be made for those willing to hold a house in the longer term.

For example, in 2008 the median price of a three-bedroom home in inner Melbourne was $740,000. By December last year it was $990,000. In outer Melbourne the median of $320,000 was $432,000 by December last year. And in regional Victoria the increase was from $240,000 for a three-bedroom home to $302,500.