Due to its unique set of benefits, real estate is one of the fastest-growing investment avenues across the world. Not only do you gain a healthy, safe, and consistent return, but you also get to own a tangible asset, the value of which is likely going to appreciate during the foreseeable future.

However, before you invest in the real estate arena, you need to understand the science behind it – mainly, the factors that drive the real estate market:

Demographics

A country or region’s demographics portray the composition of that country or region’s population.

The demographic data categories that can affect the real estate market include the socioeconomic status of the population. If that population is largely composed of the elite, upper-middle, and middle classes, their purchasing power will enable the real estate market in that region to flourish.

The Economy

A healthy and stable economy is attractive to investors. People are unwilling to put their hard-earned money in economies that are weak or volatile.

The Gross Domestic Product (GDP) is the primary indicator for assessing an economy’s condition. Other indicators include the price of goods (inflation), employment/unemployment rates, and the manufacturing activity of the country.

Interest Rates

Nobody loves taxes. In fact, there are entire courses and classes dedicated to teaching ways that people can legally minimize their taxes.

So, if the government of a particular country charges high property taxes, it is bound to discourage investors. Instead of purchasing real estate, people will turn to other business ideas that will help them mitigate their tax expenses.

On the other hand, the lower the interest rates, the lower the mortgage cost for purchasing property, and the higher the demand for real estate. Another way to boost property sales is to provide tax credits to real estate owners, which brings us to our next point:

Government Policies

Alongside tax credits, the government can introduce subsidies or deductions to propel the real estate market in its country.

For instance, as an attempt to boost the economy after the 2008 recession, the U.S government came up with a first-time homebuyer’s tax credit, which led to nearly 1,000,000 homebuyers purchasing homes during the period 2009-2010.

Employment Opportunities

As mentioned previously, the employment percentage is a crucial indicator of an economy’s performance, and, by extension, the performance of its real estate market.

With increased employment comes higher purchasing power and greater independence. This leads to people seeking out a better quality of lives, of which improved housing is an essential aspect.

In other words, higher employment (or lower unemployment) will elevate the demand for houses, apartments, and other buildings, allowing the real estate industry to prosper.

To conclude, this article presented some of the higher-level factors that play a role in the real estate market. However, several other complexities determine the direction of real estate prices. Nevertheless, an understanding of the primary factors driving real estate will enable you to effectively analyze and make decent gains from a potential property investment.