What factors affect the real estate?
- Demographics of the Country.
- Interest Rates on Loans and Property.
- The Economy.
- Government Policies Matters.
- Employment Opportunities.
- Trust in the Market.
- External Investors.
- Budget of the Country.
How does the environment affect real estate?
Air and water quality –
The quality of air and water can have a huge impact on property valuation
. Cities with poor air quality or poor water quality are less desirable and may over the longer-term experience decline in population and valuation.
How does the economy affect real estate?
Home sales usually are directly tied to an economy’s health and rise and fall with economic activity.
As economies slow, the supply of money tends to become more restrictive. As money becomes harder to borrow, fewer home buyers enter the housing market.
How does government affect real estate?
Government policies altering price and demand
Laws passed by the government exert a significant effect on the value and demand of private property.
Encouraging housing laws will lead to a temporary increase in demand for homes by government influence through tax credits, deductions, and subsidies
.
Social forces refer to
forces of the society or culture
. Some examples follow: Changes in taste. Changes in taste may be the strongest social force in real estate. Small functional bathrooms gave way to large multi-functional bathrooms.
Inflation can lead to
higher asset prices
That said, because we also see mortgage rates rise, this tends to put downward pressure on demand for real estate because debt becomes more expensive. This can in turn put downward pressure on asset prices as demand decreases.
With its low risk and high return potential, real estate is one of the best investment options. It
provides a safety net against inflation as property values rise over time
. Income creation is one of the most important aspects for horizontal property investors, in addition to having a permanent residence.
- Debt-To-Income Ratio.
- Duration of stay.
- Job security.
- Down payment.
- Emotional state.
- Local market indicators.
- Mortgage rates.
- Supply and demand.
Environmental due diligence in the real estate context tends to focus on:
Known or potential soil or groundwater contamination beneath the property from current and historic
uses. The potential for contamination to migrate to the property to be acquired from offsite locations.
Data is easily accessible, making clients more knowledgeable on the topic.
Technology allows clients to significantly narrow their searches, helping them narrow their most important criteria
. Information such as school data, 3D virtual tours, videos, demographics and crime statistics are readily available.
In this article the most common methods and forms of government intervention in real estate market such as legislation, subsidies, taxation, zoning, rent control, minimum and maximum price policies, licensing of market participants, transaction costs and procedures, banking system, restrictions on the involvement of …
Investors are likely to spot trends before they emerge by examining the demographics of an area they want to invest in.
Change in income, children growing older and moving out
– these are some of the factors that influence demand and can help investors locate desirable real estate investments.
Governmental factors include
state, regional and municipal codes
that often place restrictions on what be constructed in a particular area. These are generally implemented to protect the consumer, but may also ultimately restrict development. Each specific area in the country has its own zoning codes.
Explanation: The production of real estate requires the inputs of the four factors or agents of production:
land, labor, capital, and entrepreneurship
.
When the required returns on competing or substitute investments rise, real estate values fall; conversely
when interest rates fall, real estate prices increase
.
Typically what happens is that home loan rates rise,
housing becomes less affordable, demand goes down and the cost of housing is forced to decrease
.
Time on Market
is a key factor that informed buyers take into consideration when looking at a real estate listing. The best approach to determining the appropriate listing price is to start with recent sales of comparable properties, as close to the subject property as possible.
