The Power of Appreciation

by Coldwell Banker Island Properties | Mar 15, 2021 | Hawaii Real Estate

Owning your own home, especially in Hawaii, is a great way to build wealth. Not only do you save on rent and taxes, but you can also benefit from appreciation.

What is appreciation?

Price appreciation refers to the increased value of real estate over a period of time.  There are many factors that can influence appreciation:

  • Desirability of location
  • Future development
  • Physical features of the property
  • Overall market conditions

Benefits of supply and demand

In Hawaii there is a fixed amount of land on which one can build or buy a home. This restriction, paired with what seems to be infinite local and global demand for living in Hawaii, causes homes to go up in value as scarcity drives prices.

Real estate cycles

It is important to highlight that real estate appreciation is not linear, it ebbs and it flows. These changes in valuation can happen for a variety of reasons, such as an economic recession, global pandemic, or higher interest rates, which are all related to overall demand.

How do I use appreciation?

There are many powerful options for you when your home appreciates.

  • Move homes: For many the natural use of your home’s increased equity is to move into a home that better fits their needs whether it be a bigger home for a growing family, downsizing, better features, or  more ideal location.
  • HELOC: Through a Home Equity Line of Credit, homeowners can use the line of credit to conduct home improvements, further increasing the home’s value
  • Investing:  A home equity loan will allow you to leverage the equity in your home to purchase another property. This is a key piece for many in achieving their goal of owning multiple properties.