Wednesday, November 15, 2023 / by Teresa Pileggi
5 Key Factors That Drive the Real Estate Market
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!
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
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
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
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.