Economic Factors that Influence the Real Estate Market

Economic Factors that Influence the Real Estate Market

In the context of the economy, the cause that has a direct impact on the housing market is supply and demand. During periods of economic growth, the property requirement tends to increase.

Demand of real estate market:

The demand for houses depends on consumer confidence about the future of the economy and the housing market. If people expect prices to increase, the requirement will increase so that people can benefit from the increase in wealth. When wage growth slows and unemployment increases, we begin to question our financial security and become reluctant to part with our money, which means that demand slows down. Unemployment generates an emigration of the population to areas of better employment prospects and reduces the search for real estate in the areas where the economy is failing.

Interest rates are an important factor in determining the cost of mortgage interest payments. If banks grant mortgages with higher incomes, then the effective demand for houses is considerable. If the rental price increases, then people will make greater efforts to try to buy a home, because when buying a property through the mortgage it becomes relatively cheaper.

Inflation also significantly conditions the real estate situation because it seriously affects the real estate business, whether to buy or sell quickly, because the value of the property becomes high and people refuse to buy at higher rates.

Effect of Economic Recession on Real Estate Market:

In times of economic recession, banks and lenders often raise their interest rates; therefore real estate agents also suffer from this. With higher interest rates on loans, fewer people can buy a house, and agents find fewer potential customers. As a result, the industry becomes extremely competitive among the agents, and the value of the property begins to fall due to the decrease in demand. However, interest rates on loans will begin to fall as soon as the economy stabilizes and improves

Housing and stock markets are interconnected in multiple ways. The shares of the main builders are traded in the stock market. The home improvement companies linked to the construction of buildings are also listed on the stock exchange.

The parameters that have a definitive impact on the housing market are the availability of planning permits, the opportunity cost for builders and the increase in the price of resources. When the amount of available properties increases, the prices usually go down. If there are not enough houses in a certain area, the shortage will cause the prices to increase. Even if land is available to build more houses, the time it takes to build them can not satisfy the immediate needs of the property, so the demand will remain constant or increase. Investors should be extremely cautious before making any decision.

In summary, the situation of the current real estate market is recovering but has room to be much better. It is normal for individuals to think a lot about things before investing in housing, so your role as a real estate agent will be to advise them and make it as easy as possible to make a decision. You can also take help from any expert like Larry Weltman. For over a decade Larry Weltman Toronto has advised the real estate industry on various fronts where he has expertise and where agents have needs.

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