Increase in value is an important element of residential property investment. The added security provided by the increase in value may be used, for example, as collateral when applying for an additional loan. However, do not let an incredible increase in value fool you and do not overvalue it. It is always theoretical and becomes concrete only as the deal is being made, that is, as the true value of the apartment is set by market demand. This makes increase in value an unreliable partner in your search for profit.
Historically speaking, apartment prices have been on the rise for a long time. In terms of increase in value, location, proximity of services, green areas and bodies of water, and the potential for growth in the area provide potential benefits. This assuming that the area is popular in terms of appeal. However, remember that there is no guarantee of increase in value. The increase or decrease in value is completely dependent on the specific apartment and region. In general, apartments in city centers maintain their value and most often increase in value but, on the other hand, their rental profits may be smaller.
As you consider the potential for increase in value of your investment, remember the significance of urbanization and migration. High demand raises prices if the supply fails to keep up. And with regions in decline, there is the possibility of decrease in value. Local changes, such as major traffic initiatives, new residential construction, and decisions by educational institutions and employers also have a significant effect on the pricing. As a landlord, it is definitely worth it to keep up with local developments on a wider scale.
The Finnish Landlord Association and Pellervo Economic Research PTT publish an annual forecast on future real estate investment profits. The forecast includes 24 cities and looks at rental profit, increase in value, and regional factors. The report is available here.