When it comes to properties and their performance, few factors impact as much as vacancy rates do. Basically, the vacancy rate of a place can be defined as the available homes in a particular geographic location. Often, this rate is presented in percentage form and can be a crucial tool in helping people make the right choice about moving in or out of a particular residential community.
Vacancy rates are crucial because they let people know how a specific building or area is performing real-estate-wise. They can also act as economic indicators which spell out good fortune or hard times ahead. It is essential to know that just like unemployment rates, every location will have its vacancy rates. There are healthy vacancy rates, and some spell disaster for the communities in question. Here is why consistently high vacancy rates harm a residential neighborhood.
Undesirable Areas
In most areas where vacancy rates are low, you’ll find that most people are content living there. Meaning the homes and amenities available in the area are fantastic, which makes people living there comfortable. High vacancy rates, however, indicate that people don’t like the area too much. This can be due to the environmental factors or a general perspective people have on a particular area or building. Since high vacancy rates are the opposite of a high occupancy rate, it shows that it has an undesirable factor driving people away.
Drives Home Values Down
In places where the vacancy rates are low, home values always seem to go up. This is because there is a larger number of people competing for limited opportunities. According to Red Wagon Properties Realty, landlords can capitalize on the properties and charge a premium for the available homes. In areas where the vacancy rate is high, the opposite will occur. Since the number of available properties has surpassed the demand, property owners looking to sell or rent will have to be extra competitive to gain an advantage. In most cases, this takes the form of a rent reduction or slashing the asking price of a home by a considerable margin.
Development and Neighbourhood Stature Takes a Hit
Areas, where general vacancy rates are down, are seen by investors and entrepreneurs as ripe places to start a business. This thereby attracts businesses who invest in the community, which causes a community to grow in the right direction. Furthermore, you can expect the properties in the area to look great because of the upkeep. When there are high vacancy rates, businesses in the neighborhood also soon start to decline because many potential customers have also taken a hit. Additionally, homes that stay for a long time without being taken off the market start to crumble. When this starts to happen, the owner doesn’t feel motivated to fix the house since, in some cases, you’ll find you won’t get your return on investment.
High Vacancy Rates Are Not Good
High vacancy rates do indeed have a negative impact on residential communities. Since buying a home is a significant investment, people are advised to always check on the vacancy rates in an area to determine whether buying or renting in a certain place is wise. If a place has consistently high vacancy rates, you can bet it’s not a place to invest in.