Like any industry, real Like in industry real estate has its own
disadvantages and advantages. there are different factors that affects the real
estate industry. Some of these factors include;
·
Demographics
·
Government policies
·
Economy
·
Interest rates
Real estate industry accumulates one of the highest industry in terms of
wealth. The industry in itself is huge and that’s a lot of profits which makes
it easier to be attractive to people.
The demographics
On demographic of real estate buyers,there is provision of age, income
and preferences. It shows the percentage of buyers in terms of the youthful
buyers as well as the aged buyers. Older People tend to buy or rather invest in
real estate industry in comparison to younger generation. On the same note, the
type of real estate investments can be determined since the younger generation
will work and focus on the investment that brings back and generates more
income. The older generation will be looking for type of investments that suits
their vacation needs. They are more focused on luxury type of investments. The
higher the percentage of retirees that can afford a certain type off real
estate investment, the higher the likelihood off the industry increasing the
prices.
Government policies
Legislation is one of the factors that can also affect the real estate
investments. High taxes on residents can consequently affect the investment.
Imposing too much costs on real estate industry, can lead to the demand of the
property lowering. However, the government can equally ease the burden of such
problem by reducing taxes, offering subsidies to property as well as giving tax
credits. The government can also offer deductions on the raw materials that are
involved in the real estate industry. This will therefore increase the demand
of the investment and encourage wider the margins of profits.
The economy
Another factor that determines the value of real estate investment is
the economy; that is the state of the economy. The economy is defined by the
gross domestic product, the price of goods as well as the accessibility of raw
materials. Different types of real estate investment as discussed in our
previous blog, can be influenced by the economy differently. A recent example,
is when COVID-19 did hit the economy the hardest. The investors that had hotels
as well as renting out had the low demand because the tourism industry was as
well affected. On the other hand, real estate investment in terms of commercial
property and industrial property were less affected because normally these
types of investments have a longer lease time had residential type of property
investment. In short, when the economy is ailing so is the real estate
investment.
Interest rates
Interest rates can also in a bigger margin affect the real estate
investments. For example, if you're considering to buy a property using
mortgage, then it is advisable for you to research on the different rates of
interest that would be accumulated by the mortgages. Any change in interest
rates can determine the ability of a buyer to purchase a certain property. For
example, when the interest rates are lower so is the cost of acquiring the
mortgage which leads to higher prices and higher demand in housing as well as
other real estate investments. In the same way if the interest rates are higher
the cost of acquiring a mortgage is higher which therefore reduces the gap in
real estate investment and lowers the demand of such investments. Therefore, if
there is a need to invest in real estate industry, it is necessary to
understand the different types of markets that would favor your investment. All
these markets are determined by the interest rate and may favor either the
buyer, the seller or maybe a neutral market.
Advice; Check on these factors and how they affect value and pricing of
property before entering the real estate industry.
