The Biggest Factor Pushing the Real Estate Market Forward
The real estate market mainly entails buying and selling land and buildings. Research shows that real estate forms a significant proportion of the total wealth of most homeowners in the US. The understanding of factors that affect its values when investing directly or indirectly in property is essential.
The most significant factor pushing real estate is demography. Demographic statistics often have a massive impact on the pricing and the kind of properties that are in demand. Significant shifts in the demography of a nation often have a substantial effect on real estate trends for decades. For example, a population comprising many older people retiring would mean that the demand for second homes in popular vacation areas would increase, and its pricing increase. Conversely, if the income of a population is low, the market and prices for large houses will drop. With the growing population, it means a larger pool of potential tenants and a higher occupancy rate. That would result in higher demand in the real market, charging the tenants higher rent and a good return on investment.
Economic conditions in the country are the 2nd factor. Financial health is measured by economic indicators such as employment data, GDP, and prices of goods. A Healthy economy results in an increased value of the real estate; moreover, with increased job opportunities, there will be increased money for people to buy homes.
Improved infrastructure is also a pushing factor in real estate. When the infrastructure is improved, the house prices in the area are also increased along with connectivity and employment.
Government policies brought about through legislation have a massive impact on property demand and prices. The government can temporarily boost the demand for real estate properties by putting in place and providing tax credits, subsidies, and deductions.
Interest rates push the real estate market forward. A change in interest rate influences the ability of a person to purchase a property—the lower the interest rates, the lower the cost of obtaining a mortgage to buy a house. A low cost of purchasing means an increase in both demand and price of the property.
This article described some of the key factors pushing the real estate market forward. But there are also more complex factors that come into play. And although some of the factors mentioned above suggest a clear-cut relationship between the element and the market, the results can be very different in practice. Therefore, understanding these key factors is essential to performing a comprehensive and critical analysis of a potential investment.
The push for retirement homes, vacation properties and second homes are on the rise and have been for the past couple of years. We've noticed in the Sanibel Island and Captiva real estate markets, this is the majority of purchases. Finding the year-round vacation environment has appealed to many and we believe we're just getting started.