Buying a house is a tricky task for a new homeowner
wannabe. That is caused by house price distinction. One may be cheaper than the
other. But, what cause this price differences? For example, two identical
houses with the exact same land size and building have been built in location A
and B. However, the house price in location B is more expensive than the one in
location A. Some factors have to affect this differentiation and as simple as
others economic aspect, demand and supply control the price.
A high demanding house cost a lot higher than a less
demanding house. The most important thing that affects demand of a house is
location. Most of the people wanted to live in a safe neighborhood, close to
medical service, shops, workplace, reliable public transport, and close to
school for a family with children. They tend to choose those criteria in a
quite enough area. Therefore, a house on a main road, busy traffic, full of air
pollution, and too noisy will make them think twice. It results on house prices
in those areas are more affordable than on the first criteria.
After location, a house condition will determine the
price. It is a common sense that a bigger house will be more expensive than a smaller
house. Also, a worse condition house will be cheaper than a better one. Even
sometime the building materials that have been used become one of the
influential factors.
Apart from the house direct factors, there are several
other indirect elements that influence demand and house price. The first one is
economic growth. Economic growth in an area will affect on house demand and of
course their price. For example, in a city where the money rotation has been
fast the population growth will be too. It will increase houses demand and the price.
The next factor is mortgage availability. With this one, even a person with
medium salary can own a house. So the target market range will expand.
Demand alone cannot determine the price without
considering numbers of supply. When there is oversupply of houses in one area,
therefore the houses price will decline. This term usually happen in less
desirable location. On the contrary, when there is undersupply of houses in one
area, therefore the houses price will ascending. This second term usually
happen in a desirable location.
As in other economic aspect, demand and supply determine
price in housing market. Demand will be increased by house location and
condition, also by economic growth and mortgage availability. Then supply will
support demand. If the house supply more than demand then the price will
decline in that area. Otherwise, if house supply less than demand then the
price will incline.