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Real Estate Market: What Factors Drive it?

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The real estate market is a huge and lucrative market, but what drives it? This article will discuss the most important factors that push or pull the real estate market. Read on!

Demographics

Demographics are the Wibest FSMsmart Review data that describes the composition of a population. This includes age, race, gender, income, migration patterns, and population growth. These stats are usually overlooked. However, they are significant factors that influence how real estate is priced and what types of properties are in demand.

Huge changes and shifts in the demographic of a nation can have large impact on real estate trends for several decades.  

Interest Rates

Interest rates also Wibest Forex Brokers have significant impact on the real estate markets. If you’re thinking of buying a home with a mortgage, it may be advantageous to research on the interest rates using tools like a mortgage calculator.

Change in interest rates can greatly impact a person’s ability to buy a residential property. That’s because the lower interest rates go, the lower the cost to obtain the mortgage to buy a home. This spurs the demand for real estate and thus pushes up prices.

Bear in mind that as interest rates increase, the cost to obtain a mortgage increases. This lowers the demand and the prices for real estate. On the flip side, the impact of interest rates on equity investment like real estate investment trusts (REITs) is more similar to that of bonds and interest rates.

Economy

The overall health of the economy is generally gauged by economic indicators like GDP, employment data, manufacturing activity, the prices of goods, et cetera. In general, a slow economy also means slow real estate.

On the other hand, the cyclic nature of the economy can have varying effects on different types of real estate. For instance, if an REIT is more invested in hotels, they are more likely to be affected by an economic downturn than REITs that are invested in office buildings.

In a nutshell, renting a hotel is a short-term lease which customers can avoid when the economy goes south. Meanwhile, office tenants are usually long-term leases that cannot quickly change during an economic distress. In other words, you should be more familiar with the sensitivity of your investments to the economic cycle.

Policies and Subsidies

Legislation is another factor that can have a huge impact on property demand and prices. Some of the ways that the government can temporarily boost demand for real estate are tax credits, deductions, and subsidies.

You should be aware of the current government incentives because being so will help you determine changes in supply and demand and spot potential false trends.

Searching for the Best Investment

The size and scale of the real estate market make it an attractive and lucrative market for many investors, who can invest directly in physical real estate or choose to invest indirectly through managed funds.

Investing directly in real estate involves buying the residential or commercial property, which would be used as an income-producing property or for resale in the future time. Meanwhile, indirect ways to invest in the real estate market include real estate investment trusts (REITs), real estate exchange traded funds, and infrastructure funds.

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