Real estate investment has become popular nowadays as most investors are now more interested in property investments than stocks. One of the ways and/or methods that investors do to expand their portfolio and make more money from their start-up investment is, for example, to buy a condo in Laguna and turn it into a rental property.
On the other hand, most people who have a successful harvest hunt for a worthwhile investment with their money and therefore will probably use it to purchase their first and most valuable asset— something they can call their own and their home.
However, even if the majority of these real estate investors benefit from owning real estate, it is still inevitable to run into a few challenges along the way that has an impact on one’s investment. Therefore, some factors that affect real estate prices will be covered in this article, as well as a brief explanation as to how it affects a real estate investment in any way possible.
Key factors affecting the real estate industry
Demographics
Certain demographic data categories may have an immediate impact on the real estate sector. Demographics disclose information on the age, race, gender, income, and preferred regions of present or future investors, as well as how many of them are retirees and how many might purchase a second home or vacation property. These statistics are frequently disregarded but are an important component that influences the cost of real estate and the kinds of properties that are in demand. On the other hand, significant changes in a country’s demography can also have a major impact on real estate trends/patterns for several decades.
Furthermore, it has been clearly established that socioeconomic factors play a significant role in the long-term prediction of real estate prices. Affordability continues to be a major concern because of the high costs of existing properties and the shortage of inexpensive, conveniently situated properties inside the urban core.
Interest Rates (Loan and Property)
It is convenient to use a mortgage calculator to study interest rates if an individual is thinking about getting a mortgage to purchase a condo in Laguna. This is due to the fact that changes in interest rates can significantly affect a person’s capability to acquire a residential property or commercial real estate, which has an impact on both the price and demand of real estate. Lower rates attract more buyers since obtaining a mortgage is less expensive, but they also increase demand for real estate, which can lead to an increase in real estate prices.
Additionally, it is also necessary to keep in mind that as mortgage costs climb along with interest rates, real estate demand and prices will decline. But when considering how interest rates affect an equity investment, such as a real estate investment trust (REIT), as opposed to residential real estate, the link can be compared to how interest rates affect bonds.
Moreover, a bond’s value rises when interest rates fall because its coupon rate becomes more appealing, as well as a bond’s value drops when interest rates go up. Similar to how high returns on REITs become more alluring and their value increases as market interest rates decline. A REIT’s value decreases as a result of the return is less appealing as interest rates climb.
Steadily Rising Career Opportunities
A high employment rate indicates that the population is financially independent and has a large purchasing power. In other words, more people will be able to purchase a condo in Laguna when the employment rate keeps rising. Enhanced job creation, on the other hand, is frequently associated with the development of new industries, new business neighborhoods, and local large firms in migration. The fear of losing one’s job or an economic downturn also diminishes buyer attitude and tends to deter people from entering the real estate market, which lowers demand while unemployment is on the rise. Additionally, one of the most essential advantages provided by most real estate developers is accessibility to employment opportunities. This is the main cause of the bid-rent gradient in urban economics and a major influence on property prices and real estate values.
Location
Although there are numerous aspects that influence a property or area’s value to a prospective buyer or tenant, one of the things they will probably be most interested in is its location. The distance to the closest shopping centers, hospitals, churches, or road infrastructure is taken into account in the assessment since better access to entertainment, leisure, and transportation typically leads to higher house prices. High accessibility to upscale amenities, like being close to the gym and swimming pool, is also reflected in the pricing value. On the other hand, in an effort to cut down on travel expenses or time spent driving, homeowners or renters may also want to reside closer to schools or universities. The distances to the closest airport and business district are also provided.
Government Policies and Subsidies
Another factor that can have a major influence on the demand for and price of real estate is legislation. Considering that there are ways that the government might temporarily stimulate demand for real estate for about as long as they are in effect, the government may assist investors and developers by granting them tax credits, subsidiaries, and deductions. These actions will assist the nation in developing better infrastructure while also luring international investors for commercial and residential projects. In addition, an investor can assess changes in supply and demand, and recognize possible deceptive trends by being aware of existing government incentives.
Economy
The state of the economy as a whole has a significant impact on the housing market value. Economic metrics like the GDP, employment statistics, manufacturing activity, retail pricing, etc. are typically used to measure this. Generally, real estate suffers when the economy is weak. It’s crucial to keep in mind, though, that different forms of real estate might be affected differently by the economy’s cyclicality. And while anyone should be aware of what stage of the cycle the economy is now in, they also need to be aware of how the economic cycle affects real estate.
Read more: Factors To Consider When Buying A House And Lot in the Philippines
