The real estate market is the economic sector that involves the purchase and sale of infrastructure such as buildings, whether for residential purposes, commercial premises and the industrial segment. Like any business sector, it is susceptible to the economic forces of supply and demand. The main people involved in this field are the owner, the tenant, the developers, the renovators and the facilitators.
This sector has a series of characteristics that are specific to it. Real estate is durable as buildings can last for many years, while the land on which they are located is indestructible. As a result, the supply is made up of a large part of existing stocks and a small percentage of new developments. Therefore, the stock varies in price only based on deterioration, renovation and new development that is coming.
The stock in this sector could be called heterogeneous since each piece is unique. All buildings are different in terms of where they are located, their structure and design, as well as the way they are financed. Change in this field takes a long time. This is due to the long duration involved in financing and building new properties.
Real estate has a unique characteristic in terms of buyers in this market. The property can be bought as an investment with the expectation of making a profit or as a consumer good with the idea of using it. People could also invest in the market for both reasons, that they use the property for a time before selling it at a profit. As a direct result of its dual nature, there is high demand as individuals tend to overinvest in this sector.
Immobility is another unique feature of this sector. Both the properties and the land on which they are located are immobile. As a result, there is no physical market, which means that one has to go to the place where the property is located. Therefore, this issue makes location a prime factor before investing.
The main factor in the demand for properties is demographic, that is, the size and growth of the population. Demographic makeup plays a very important role in determining demand and, as a result, price. The performance of the economy also affects the performance of the sector, as it plays a role in the ability of investors to take out loans and mortgages to finance their business ventures. Naturally, the price determines the level of demand in the sector.
There are several ways to finance investment in the real estate market by government and commercial institutions. Financial help can be obtained from commercial banks, savings banks, mortgage brokers, life insurance companies, and other financial institutions. However, the best practice is still to obtain financing from your own savings.
In view of the recent downturn in the housing market, it is best to follow some guidelines. As a buyer, make sure that the price you pay for the property is very important, as well as the ability to get rid of the purchase later. If not, it is advisable to reduce the size of your mortgage to be safe. As a seller, identify when is the right time to put your property on the market to avoid low offers.