5 Key Factors That Drive the Real Estate Market

Overview

By now, you are aware that the real estate market is one of the most lucrative areas that you can

invest in and make more money. While this is true, the return on investment is always dependent

on a number of factors. From the demographics to the interest rates at the moment, an array of

factors affect or drive the real estate market. As an ambitious investor, there is a need for you to

be acquainted with these factors and how they affect the real estate market so that you can make a

wise decision. Remember that these factors can affect the real estate market either positively or

negatively. In this article, we shall illustrate these factors so that you can know them better. Read

on to know more!

1. Demographics

One of the key drivers of the real estate market is the demographics of a certain area, city, or

neighborhood. Simply put, demographics refers to the data that describes or shows how a

certain populace is composed. Some details covered here include migration patterns, income,

gender, race, age, population growth, and so much more.

You have to pay attention to these factors whenever you want to invest in a real estate property.

In fact, these facets affect the kind of properties you are bound to find in a certain neighborhood

or city.

2. Interest rates

Besides demographics, the other factor that drives the real estate market is the interest rates

charged by different financial institutions. For instance, when the interest rates are low, most

people will be able to take loans and invest in real estate properties.

From buying pieces of land to purchasing different properties, there are many options that you

can consider once you get the much-needed financing. However, if the interest rates are high,

most investors will shy away from taking loans. Instead, they might consider forfeiting the entire

undertaking until the interest rates get to manageable levels. Waiting for interest rates to drop

will cause you to pay more money for a home in the long run.

3. The economy of your country

If your country’s economy is not doing well, the real estate market is bound to get hurt. For

example, during the COVID-19 times, there was a great recession all over the world and the

effects are still being felt to date. Suppose you become a victim of such circumstances; you will

not be able to make ends meet. As a result, you will not have enough money to invest in the real

estate market. Even if you have a job during such moments, you may be worried that you might

lose it in the long run.

As a result, you might end up using your savings to purchase different properties. If the savings

are limited, be sure that you will not have the luxury to purchase more properties like you would,

in case the economy was good. Remember that if one is confident about his or her job, be sure

that such an investor will be ready to take loans and invest in real estate properties out there.

4. Stock market

Most people usually tie their wealth to the stock market. As a result, this is a critical factor that

can drive or affect the real estate market. Suppose the market crashes, most people will not have

enough money to make a down payment. Such was evident in 2008 in the United States.

If this happens, most people will be inclined to save their hard-earned money rather than spend it

on real estate properties. However, once the stock market starts to take a positive trajectory, most

investors will be confident to purchase different properties within their neighborhood and

beyond.

5. The Government

The current government is a critical driver of the real estate market. To put this into perspective,

when a government offers subsidies, it will spur growth in the real estate market. Other times,

the government can offer loans to different people so that they can make purchasing a home a bit

easier.

However, there are instances it might change a number of policies that can eventually lead to

slow real estate market growth. All these factors will affect the price of the real estate properties

either positively or negatively.