3 Ways Economy Impacts Real Estate

If you already have a stable source of income, investing in real estate must have certainly crossed your mind. As per the census 2011 data, only 69% urban household own a home. Moreover, real estate attracts lucrative returns on investment. But, what are the factors that affect real estate?

The Demographics of the Economy

The data that describes the population composition such as age, migration, income, gender and migrating patterns of the people. These factors dictate the real estate price and the kind of properties in demand. If there is a substantial shift in the standard of living of the demographics, it will invariably affect the real estate price trends for the decades to come or in other words, the prices will increase.  

The economy as a Whole

What comes to your mind when you read the word ‘economy’? It is the key terms like GDP, unemployment rate, national income, inflation and much more. These are the key economic indicators, which tells about the health of the economy. There is a direct positive correlation between the economy as a whole, determined by the key economic indicators and the real-estate property prices; the real-estate prices will go down if the economy is sluggish. For instance, take into consideration the unemployment rate. If there is unemployment in the economy, the purchasing power of the people decreases as the prices of the goods and services are high. This leads to the discouragement of investing in the property. However, office leases remain unaffected from the economic meltdown .It is because the prices for these properties cannot be changed in the middle of an economic meltdown.

Interest Rates and Government Subsidies

This is one of the most important factors in determining property rates. If the interest rates are high, it will discourage the people to seek home loans and hence, bring down the property rates. Alternatively, if the property rates are low, more people will see the mortgage loans and this pushes the property prices up.

If a country’s government is providing a subsidy to the industries, they will increase their capacity to produce and try to achieve economies of scale. This will lead to more hiring and hence, more people migrating to nearby areas. The prices in that area will automatically rise.

Conclusion

These few macroeconomic factors affect the fluctuations in real estate prices. There are other factors in play as well like tastes and preferences, geographical importance and so on.

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About srushti

The author of this article is a award-winning writer who is passionate about Apartment, Property as well as Real Estate.He expresses his views regularly through his blog.
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