Location is one of the most important factors in real estate pricing. Neighborhoods with thriving commercial businesses, access to community resources, and strong transportation systems are highly desirable for buyers.
If you’re considering investing in real estate, you must consider the current state of the neighborhood as well as its future. New developments could have a dramatic impact on a property’s value, and preparing for these changes will help you maximize your return on investment.
Development Plans That Increase Property Values
In most cases, new infrastructure and urban development will increase property values. The following are some of the most common development initiatives that are likely to drive up values of both residential and commercial properties:
Transportation Development
Functional, effective transportation systems are extremely desirable. If your city has plans to build new highways or expand public transportation, you can expect property values to rise. People want to live in neighborhoods with strong infrastructure and access to public transportation. Improving the transportation system also results in the growth of commercial business in the area, which further drives up the value of real estate.
Construction of New Amenities
Demand for housing is higher in neighborhoods located near healthcare centers, colleges, community centers, and other public amenities. Initiatives to build these amenities will increase property values. Not only do these resources increase the quality of life for residents, but they also bring an influx of skilled workers to the area looking for housing.
Sustainable Development Initiatives
Sustainable urban development has been a hot topic in recent years and will likely be a priority for city planners in the future. Properties that align with sustainable building standards will be in high demand. Proximity to parks or nature reserves will also be a major selling feature for residential properties.
Zoning Changes
Zoning laws dictate what types of properties can be built in an area. Changes to zoning laws can result in an influx of new developments, which will influence the value of the existing properties in the neighborhood. Property values are especially likely to rise if zoning laws change to allow for mixed-use development. Building new commercial properties and bringing in new businesses usually drives up residential home values.
Development Factors That May Decrease Property Values
While development is usually a sign that property values will rise, new constructions can sometimes have the opposite effect on existing homes or commercial spaces. Here are some circumstances in which your property may decline in value after development initiatives:
New Homes at Lower Prices
If your neighborhood experiences an influx of new homes that are smaller, simpler, and priced lower than your house, the value of your property may fall as a result. It can be difficult to sell a house that’s dramatically different from the other properties in the area.
Oversupply of Homes
Supply and demand can come into play when cities undertake development initiatives. Most areas in the United States are experiencing a housing shortage, so a severe oversupply of homes is unlikely to happen in the near future. However, an increase in the supply of residential properties will decrease demand to some extent.
Increased Density in Rural Areas
Although increased development in suburban and urban regions is usually a good sign, rural communities can be resistant to new developments. If a town’s major appeal is that it’s quiet and sparsely populated, development could drive people away.
Noisy or Disruptive Infrastructure
While new infrastructure is generally popular, it could have the opposite effect if noise, traffic, or pollution impacts the quality of life for residents. For example, building a concert venue or event space may be great for commercial business development, but most home buyers don’t want to live near such a noisy attraction. Similarly, if a loud highway is built right next to your residential neighborhood, property values may decline.
How to Evaluate Future Development Plans
Researching the upcoming development plans in an area will help you make informed investment decisions. Here are three tips to discover and evaluate future city planning projects:
Gather Information Locally
There are a number of local resources you can utilize to research a city or county’s development plans. First, visit the website for your city planner or planning board. You should be able to access meeting minutes, zoning maps, and project proposals. You could even contact your city planner directly for information. Local newspapers are another great source of information about development projects.
If you know that your city has development plans in process, consider going to city council meetings to learn more. Hearing about the goals and progress of the project can help you assess if or when you should buy property.
Look for Zoning Law Changes
Generally, a change to the zoning laws is an early sign that an area is about to undergo development. Again, you can learn this information on your city’s website, in local papers, or at city council meetings. Once developers get the legal go-ahead to start construction, they tend to act on it right away.
Identify Signs of Development
You can also keep an eye out for signs that development is already happening. If you start seeing construction projects pop up all over town, you can expect to see changes in property values. A rise in mixed-use real estate is an especially strong sign that an area is about to undergo significant development. Young professionals flocking to an area is another indicator that an area is growing.
How to Use City Planning to Inform Your Investment Decisions
If you predict that your city’s development plans will impact property values for the better, you may be eagerly awaiting your investment opportunity. While investing in a growing area can offer a great return, it’s always important to be careful and strategic with your purchases.
Invest Early
While you should never rush into a real estate purchase, investing early in a growing city is one of the best things you can do to maximize your gains. Stay alert for signs that an area is about to undergo development, and start looking for properties as soon as possible.
Blend In
Properties that match their surroundings tend to sell better than ones that stick out. Consider what types of properties will be most prevalent in an area after the development plans are completed.
For example, if you know an area is about to undergo a lot of commercial development, now could be a great time to purchase a commercial property. On the other hand, you may have a very difficult time selling a single-family residential home that’s surrounded by retail stores.
Be Patient
It often takes years for infrastructure and urban development projects to be completed, and they usually finish behind schedule. Investing early in a developing area is a great financial move, but it also requires a lot of patience. Make sure you’re willing and able to bide your time while the projects unfold.
Future developments have the potential to impact your investment property both positively and negatively. Before buying real estate, look into the city’s plans for development. Understanding how the area will change in the coming years will help you make wise investment decisions.
