Real estate represents a significant portion of most people's wealth, and this is especially true for many homeowners globally. The size and scale of the real estate market make it an attractive and lucrative sector for many investors around the world.
Demographics: These are the data that describes the composition of a population, such as age, race, gender, income, migration patterns, and population growth. These statistics are an often overlooked but significant factor that affects how real estate is priced and what types of properties are in demand. Major shifts in the demographics of a nation can have a large impact on real estate trends for several decades.
Interest Rates: Interest rates also have a major impact on the real estate markets. If you're considering buying a home with a mortgage it is beneficial to research interest rates using a mortgage calculator. Changes in interest rates can greatly influence a person's ability to purchase a residential property. That is because the lower interest rates go, the lower the cost to obtain a mortgage to buy a home will be, which creates a higher demand for real estate, which again pushes prices up.
The Economy: Another key factor that affects the value of real estate is the overall health of the economy. This is generally measured by economic indicators such as the GDP, employment data, manufacturing activity, the prices of goods, etc. Broadly speaking, when the economy is sluggish, so is real estate.
Governmental Policies: Legislation is also another factor that can have a sizable impact on property demand and prices. Tax credits, deductions, and subsidies are some of the ways the government can temporarily boost demand for real estate for as long as they are in place. Being aware of current government incentives can help you determine changes in supply and demand, and identify potentially false trends.
These are some of the higher-level factors that play a significant role in moving the real estate market, but there are also more complex parts that come into play. And although some of these aforementioned factors suggest a clear-cut relationship between the factor and the market, in practice, the results can be very different. However, understanding the key factors that drive the real estate market is essential to performing a comprehensive evaluation of a potential investment.