Top 8 Factors Affecting the Real Estate Market Today

Before we dive into the factors affecting the real estate market, let’s understand what it actually is. 

What is the Real Estate Market?

A real estate market is a platform where people purchase, sell, or rent properties for commercial or residential purposes. These properties include underdeveloped lands, office and residential buildings, complexes, and houses. 

The real estate market is a very important factor in a country’s economy, and many factors influence it. These factors include: 

• Economic Factors 
• Interest Rates
• Demographics 
• Demand and Supply 
• Location
• Government Policies and Regulations 
• Climate Changes and Natural Disasters
• Pandemic Effects

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Economic Conditions

The country’s economic situation can be a huge factor affecting the real estate market. The economic condition displays how well people are financially. If they are doing well, the real estate market is more likely to experience a spike in business. In the same way, when the economy is down, it indicates that people are struggling with their finances, and the market is most likely going to experience a low period. 

The key factors to look out for in understanding the economic conditions are the GDP, job availability, inflation, etc. If these factors seem to be in a good place, your country’s economy is going strong. 

Interest Rates

Interest rates could have an enormous impact on the real estate market as they control how much potential buyers spend. Lower interest rates mean that people have to pay less on home loans, which would boost the real estate market profits because people know that if they buy properties at these times, they are more likely to get low-interest charges on bank loans. Inversely, people would hesitate to go after a property when interest rates are high because it would mean paying more interest, making it an expensive purchase. 

Demographics

Demographics, meaning people’s age and preferences, also influence the real estate market. 

How are these factors relevant? People born between 1981 and 1996, so basically millennials, are in their prime as of 2024, which means that they are financially stable and are most likely looking to buy houses. So, the real estate market has to adjust its properties to suit this generation’s housing needs, which would be a smarter house. Therefore, the real estate market has to make its move according to current generations’ demands, or else it will experience a slow market. 

Supply and Demand

Demand and supply are key factors affecting the real estate market. The demand and supply of properties can greatly impact property prices. 

In a market situation with a limited number of houses available and an increase in the number of property buyers, prices will spike because of the higher demand.

On the flip side, if there is no shortage of properties to be sold but very few buyers, the power of price changes towards the buyer’s side. Because the buyer has so many options, property prices tend to drop. 

If we were to talk about current times, a place with more job opportunities, better facilities, and popularity is more likely to experience higher prices than other areas because more people are attracted to such places. 

Location

As the saying goes, “Location, location, location.” It was true and still is. The real estate business is all about location. Builders are always looking to construct properties where the demand is already high, or they believe it will get high because these places offer high prices for properties. 

How would you determine whether a location is considered in high demand or will be a high-demand area? There are certain factors to be considered here:

• Job Opportunities
• Malls
• Restaurants and Bars
• Essentials Store – Groceries and Daily need products

If the area has these, it’s likely to have more demand and higher-priced rental and purchasing properties. 

Government Policies and Regulations

Government policies and regulations also heavily impact the real estate business. There are so many little hidden yet high-impact things like tax incentives, zoning laws, and subsidies that can affect a new construction decision. 

For example, if the government lowers the taxes on buying houses, more people will look for properties to invest in. Or if the zoning laws are too strict for construction—only 7-story buildings are allowed—the area will not have new construction. 

Climate Change and Natural Disasters

When we experience any natural disaster or heavy climate change in a city or area, it’s most likely to be in the news, not just to show how things are but even as a warning for other cities to be safe. Now think about this: You keep hearing news about floods, tornadoes, or other things constantly happening in a city or an area. Would you want to live there? No, right? 

In the same way, people want to avoid areas with too many and continuous natural disasters. The real estate business in such areas will most likely experience slow business and low prices. 

Areas that are being highlighted for their safety, clear and fresh climate, greenery, or other natural features without any problems are bound to experience better real estate business, even at higher prices. 

COVID-19 Pandemic Effects

This is a special section, as it’s not a factor like any other.  The pandemic from 2019-20 had its own effects on people’s minds and the real estate market. 

After the pandemic, people understood how neglected they could be in their houses; this led to changes in people’s preferences. More people want their house to have an indoor office place, gym space, and whatever they understand is important to them. 

Even for commercial spaces and offices, people want a place where they are comfortable and at peace, like a meditation room, game room, or similar space. These new factors have arisen recently and also shape the real estate market. 

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FAQs

Final Statement

The real estate market is volatile and depends on several factors. Knowledge of these factors benefits sellers, buyers, and investors by helping them make better decisions.