What Is Capital Growth in Property & What Are the Factors That Can Influence It?

Understanding Capital Growth

Capital growth, also known as capital appreciation, refers to the increase in the value of a property over time. This growth is realised when the property is sold for more than its purchase price. For property investors, capital growth is often a critical component of a successful investment strategy, as it directly contributes to the overall return on investment (ROI). At Apollo Investment, we specialise in NDIS property investment, particularly in Specialist Disability Accommodation (SDA) housing, offering our clients opportunities to achieve strong capital growth with high-quality, purpose-built properties.

Factors Influencing Capital Growth

Several factors can influence capital growth in property, and understanding these can help investors make informed decisions.

Location

Location is one of the most significant factors affecting capital growth. Properties situated in areas with strong economic activity, good infrastructure, and desirable amenities such as schools, parks, and shopping centres typically experience higher capital growth. Additionally, properties in regions with limited land supply and high demand tend to appreciate more rapidly.

When choosing a location, considering areas with high population and employment growth, especially those near healthcare facilities, educational institutions, and planned infrastructure projects, can be beneficial. Properties in family-friendly neighbourhoods with good schools, parks, and recreational facilities also tend to see higher demand and, consequently, greater capital growth.

Land Content

The size of the land on which a property sits is crucial for capital growth. Land generally appreciates over time, while buildings depreciate. Therefore, properties with a higher proportion of land content may experience significant capital growth. While units may generate a higher rental return because of the sheer number of renters residing at the property, houses and townhouses typically offer more land content compared to units. 

Economic Conditions

The broader economic environment plays a crucial role in capital growth. Economic stability, low unemployment rates, and strong GDP growth can lead to increased demand for property, driving up prices. Conversely, economic downturns can slow down or even reverse capital growth trends.

Supply and Demand

The balance between property supply and demand directly impacts capital growth. When demand for property exceeds supply, prices are likely to rise, leading to capital growth. Factors such as population growth, urbanisation, and housing shortages can drive demand, while overdevelopment can increase supply and temper price increases.

Interest Rates

Interest rates influence the affordability of mortgages and, consequently, property demand. Lower interest rates make borrowing cheaper, increasing buyer activity and potentially driving up property prices. On the other hand, higher interest rates can reduce affordability and dampen demand, slowing capital growth.

Government Policies

Government policies and regulations can significantly impact property capital growth. Policies that encourage home ownership, such as tax incentives and grants, can boost demand and prices. Conversely, restrictive policies, such as high property taxes or stringent zoning laws, can limit growth.

Infrastructure Development

Infrastructure projects, such as new roads, public transport links, and community facilities, can enhance the attractiveness of an area and lead to capital growth. Properties in locations benefiting from significant infrastructure investment often see substantial value appreciation.

Market Sentiment

Investor and buyer sentiment can also influence capital growth. Positive market sentiment, driven by confidence in economic stability and future growth prospects, can lead to increased property demand and higher prices. Negative sentiment, however, can have the opposite effect, reducing demand and slowing growth.

Apollo Investment and Capital Growth

At Apollo Investment, we understand the importance of capital growth in building a successful property investment portfolio. 

Apollo houses are designed and built to be of high quality to help with capital growth potential. Unlike low-quality, cookie-cutter houses, our properties are purpose-built and constructed to the highest standards. We go above and beyond design standards to ensure a desirable home that will stand the test of time is built. They are located in popular areas, enhancing their appeal and potential for capital appreciation. Our long-term approach and dedication to client success have helped many investors build cash-positive portfolios with multiple SDA properties.

Understanding the Path Forward

Capital growth is an important aspect of property investment, influenced by various factors including location, land content, economic conditions, and property quality. By understanding these factors, investors can better navigate the property market and make strategic investment decisions.

For more information on how our properties are designed with capital growth in mind, get in touch with Apollo Investment today. Let us help you build a property portfolio in the NDIS sector.

‍