Aside from being home to countless landmarks, breathtaking views, start-up companies, and of course Hollywood, the state of California has been and continued to be a state that embraces change, opportunity, and as surprising as it might be to some, real estate. Throughout the past 40 years, the state has outsized wealth growth for real estate owners and continues to offer impressive benefits to those looking to do their homework, research the markets, and investwiselyin California real estate.
A Continuously Increasing Population
The total population of the United States is projected to increase dramatically over the next 50 years or so. And no area is expected to increase in population quite as much as communities that are located along the coastline. Thanks to the great weather, continuous development of Internet startups, and the ever-expanding tourism industry throughout the state, it is anticipated that California will become one of the state’s most highly impacted by this influx, causing property prices throughout the state to rise.
Valuable Land is Scarce
Due to the massive amount of interest that already exists for living in the Golden State, there is an immense lack of vacant land located in a reasonable proximity from the primary areas of employment. In fact, there are less than 25,000 lots left in the state that isavailable for development before the entire county of San Diego is built out. This scarcity of vacant land means that prices for both already developed houses and the lots that remain are expected to increase noticeably over the next few years.
Limitations on Property Tax
Perhaps one of the most influential factors in California being such a great spot for real estate investors is what is referred to as “Proposition 13” aka the limits on property tax increases. Unlike other states, when you purchase a property in the state of California, your regular property taxes are only 1% of your purchase price, so on a $200,000 property, you would way $2000.00 in property taxes. Now, as with all states, there are regular increases on this tax, however, what sets California apart is that that original amount can increase no more than 2% each year. Since Proposition 13 was passed, this increase has averaged about 1.5% yearly.
This regulated increase is a huge benefit to real estate owners, and investors. Knowing what the maximum increase might be to your property tax makes the task of budgeting for homeowners and investors that much easier, and has become a huge benefit to the California real estate market in general.
Development and Permit Red Tape
In addition to the scarcity of vacant land, especially vacant lots located within a commutable distance to the major employment hubs of the state, getting approval and permits for new developments is not an easy thing to do. Common issues regarding new housing development in the state include a land owner wanting an exceedingly high price for their property, the incredibly high cost of high-qualitylabor and materials, or the expensive cost of permits. All of these factors impact the overall housing availability and market throughout the state, and will most likely continue to impact both current and future property values.