Real estate forms a noticeable chunk in one’s personal wealth. For some of us, this may be about moving into our very first home. For some others, its could mean earning a good livelihood from the investments we make.
So, what really drives the real estate markets? Here are 5 important factors to watch for:
Population is a fundamental driver of property markets. Australia’s population topped 24.3 million in 2016. In the coming 30 years it is projected to increase by 11.8 million. About 75% of this growth will occur in Sydney, Melbourne, Brisbane and Perth, Source – infrastructureaustralia.gov.au. To meet the demands of a larger population, there will be a rapid increase in the delivery of housing supplies.
Infrastructure plays prominent role in planning a city and endures services like transport, health, safety, education and recreation. A developed neighbourhood assures the buyer an escalation in the evaluation of the property at a rate higher than the market standards. As a result, development of each city is a matter of great significance for property investors. Infrastructure projects benefit from improved development of amenity and connectivity to major employment hubs. Brisbane currently stands out with huge investment in infrastructure expenditures signalling it’s on a high peach of major growth.
Demographics are the data that describes the composition of a population, in a certain geographical area taking concepts such as age, gender, ethnicity, income, migration patterns and occupation. How is this important? Well, Young families on an average household income are more likely to prefer traditional house and land offerings in the suburbs while areas with a younger age composition that is of an Asian ethnicity are more likely to opt for apartment stock.
Interest rates play a major role on real estate markets. Even a moderate change can greatly influence a buyer’s ability.
This is because as interest rates decline, the cost of borrowing declines, which creates a higher demand for real estate. In reverse, if the interest rates were pushed up, the cost to get a loan increases, disqualifying any potential buyers.
Government policies and subsidies also have a notable effect on property demand and prices. Lower tax rates, concessions and subsidies combine to make wealth accumulation in the real estate sector more attractive than other assets.
The factors mentioned above play a significant role in influencing the real estate market. Its important to invest in the long-term in the fundamentals to completely evaluate a potential investment.