The real estate industry is a continuously booming market, even if numerous factors like economic growth and more affect it. However, one of the hidden catalysts that drive the real estate industry is infrastructure. This factor isn’t often apparent since the biggest causes that increase demand and property values are government policies, economy, interest rates, and demographics.
On the other hand though, once infrastructure projects increase and help improve quality of life, demand for real estate properties will skyrocket. Be a wise investor and homebuyer now when you find out why infrastructure is the hidden catalyst that moves the real estate industry.
What is infrastructure?
Infrastructure is any facility or system built and created to help make people’s lives easier and more convenient. Basically, it’s the backbone of society since numerous types of infrastructures exist from railroads to telecommunication networks. Infrastructure is a concept that covers a wide-range of ideas and has two main classifications: soft and hard infrastructure.
A soft infrastructure is systems and institutions that allows society, economy, and an entire country to function smoothly. For example, an academic institution, its curriculums, and how it is managed falls under this. On the other hand, the hard infrastructure is the more apparent driving factor to real estate since this covers physical structures like train lines, tunnels, and more. This means that it’s the physical manifestation of ideas to make it easier for society to function.
How infrastructure affects the real estate market
Considering one of the main factors of demand and increase in property value prices are the proximity of conveniences in a good location, the number and type of infrastructure projects help make an impact on this. The basic infrastructure projects seen in an area with high real estate demand includes quality schools, hospitals, businesses, and more. See below the effects of three different types of infrastructures to the real estate market:
Areas with great school districts—whether they’re public or private schools—generally have a higher average price value. Moreover, according to research analyst of realtor.com Javier Vivas, homes within A+ school districts are valued 49% higher than the average property price. This is because these districts guarantee excellence in education, making it a great investment even if you don’t currently have children. Demand is high in these areas, allowing for school infrastructures to be the catalyst in increasing real estate property prices.
Recreational activities like walking, swimming, and more are popular, making it so that infrastructures for them contribute significantly to property values in the area. For example, homes near parks can increase property values up to 8% to 10% above the median average. Additionally, properties facing golf courses or close to it, increase their prices up to 15% to 30% based on median average.
One of the key components of a convenient and functioning society is a good transportation system. The better the ease of access to districts and numerous areas, the higher the increase of productivity, business profits and more. As such, once transportation systems have been improved on, the demand for real estate properties in this area will skyrocket, increasing the average property values alongside quality of life.