Capital Appreciation can be defined as either the increase of an investment’s value or an increase in the price or value of assets.
Compared to other industries, real estate is unique given the intrinsic capital appreciation it provides to homeowners. A purchased house will be worth more in the future. This is due to the scarcity of land and the increase in housing demand as the population grows over time. However, not all real estate is created equal with certain real estate appreciating at a faster pace compared to others. This is primarily due to the location of the property and its high-end nature. Today, we will take a look at why certain properties are priced higher than others and how this is reflected in capital appreciation.
- Location
To begin with, location is one of the key factors that determines the appreciation of a piece of real estate. If a residential property is located in a metropolitan area, it means that the homeowners will easily access public transportation together with other amenities. This is not the case for residential properties in rural areas. In the case of VAAL, the residential properties it offers are located in the Nairobi metropolitan area which grants homeowners access to numerous amenities that are unavailable in rural areas. Furthermore, the fact that Nairobi is the largest business hub in East and Central Africa further compounds the capital appreciation of residential property in the area. Nairobi’s importance to international trade in the region means that the demand for real estate in the City will only increase over time.
- Luxury
Other than location, luxury is another key factor that determines the capital appreciation of real estate. Luxury real estate offers homeowners the possibility of property flipping in the future given its intrinsic high-quality nature. High-end residential property is always in demand and this is compounded by the expanding demand from a growing African middle-class. For this reason, a homeowner can buy a VAAL property and find a willing buyer in the future. The high-end amenities offered by these properties will always be in demand and this explains the capital appreciation that VAAL properties promise its buyers. Renting out the purchased property is also another option for the homeowner. This means that a VAAL property can become a secondary source of income for the owner.
- Scarcity of land in upmarket areas
The land is scarce and in high demand in upmarket areas and as a result, the prices have increased. An acre of land in Westlands is valued at Ksh. 400M. Buying property in such a location automatically makes it more valuable due to the high demand for land.
- Amenities offerings
The type of amenities a development offers its residents is a key determinant of the price and value of the property. Most developers offer standard shared amenities. We at VAAL go the extra mile in addition to the ordinary we make our amenities extraordinary.
An example is the BBQ area which consists of a gazebo, grills, and a countertop for easy entertainment of many guests. You can visit the Mon Valley Apartments along Mandera Road in Kileleshwa to see this one-of-a-kind amenity offering in the area.
- Quality
The finishing used for a property influences the value it gains.
Our products last 10 years plus with zero maintenance so you don’t have to spend extra amounts of money which affects your R.O.I
For example, you can view Divine Suites along Riverside Drive which is open daily for a feel of international hotel standard finishing.
Here is an example of how you attain optimized capital gain:
2019 Price: 8,800,000 * 15%= 1,320,000
2020 Price: 8,800,000 + 1,320,000= 10,120,000
2021 Price: 10,120,000 + 1, 320,000= 11,440,000
In 5 years (2025)= 15,400,00
All in all, not all residential properties are created equal. Factors such as location and luxury offerings determine the capital appreciation that a specific piece of real estate will offer you. The high-quality offerings of VAAL properties offer you both and this opens up a world of possibilities.
Prepared By:
Sandra Njue,
Digital Marketing Executive,
Vaal Real Estate.