A substantial portion of most people’s wealth is represented by their real estate. That being said, it’s no wonder why more than 60% of the population in England are homeowners.
Having in mind the financial crisis that had hit the UK property market, along with the Brexit referendum from 2016, the market seems to be recovering slowly, but steadily. Additionally, experts predict a stable growth and advancement over the years thanks to particular relief initiatives, such as lowered interest rates.
Anyone trying to get into the real estate business must understand the basic factors that influence the value of a property. This guide is going to cover key factors that can have a serious impact on the real estate value.
1. Population trends
Data that represents the composition of a population, such as gender, race, age, average financial income, population growth and migration patterns, can be crucial when it comes to the price of a property.
A great example of how a demographic trend might influence the real estate market is the generation of baby boomers. Baby boomers are people born between 1945 and 1964, and they comprise the largest population boost in history. Their transition to retirement is a noticeable trend that began in 2010 and will last for a couple of decades to come.
Therefore, investors need to pay attention to demographics in order to narrow down the type and location of a property.
2. Interest rates
Another major impact on the property market is related to the interest rates. Before buying a home with a mortgage, it’s a good idea to do research on interest rates. That’s where a mortgage calculator comes in handy. The principle is quite simple – lower interest rates lead to a lower mortgage cost. That way, there will be a greater demand for real estate, which will lead to higher prices.
Alternatively, if interest rates are high, the cost of getting a mortgage will increase, thus lowering property demand and prices.
3. The economy
Generally speaking, if the economy is suffering, so is real estate. Therefore, another factor that can have a great impact on the real estate market is the health of the economy. Indicators of the economy are the employment data, the prices of goods, the GDP, manufacturing activity and other.
However, not all types of property fall under the impact of an economic downturn. For instance, forms of short-term leases, such as a hotel room booking, would be affected by the poor economy, as it would lead to a decrease in customer number, which would affect the hotel owner. On the other hand, longer-term leases can’t be changed amid the downturn. That way, investments in office buildings wouldn’t suffer because of the decline of the economy.
All in all, investors need to be aware not only of the cycle the economy is in at the moment but also of the sensitivity of their property to that economic cycle.
The last factor on the list is the legislation. Legislation can have a rather high impact on real estate prices and overall demand. The government can increase the property demand temporarily by using tax credits, subsidies, and deductions. For instance, in a sluggish economy, the government might introduce a type of tax credit in order to jump-start property sales. That way, thanks to the attractive incentive, investors would think of it as a lucrative opportunity to invest in.
Therefore, being aware of the incentives provided by the government will help investors detect changes in supply and demand and identify whether they should invest in a property or not.
In addition to the above-mentioned higher-level factors, there are other principles one needs to be aware of when getting into real estate.
First off, in the real estate field, there’s no place for making rash decisions. Each and every purchase needs to be thought through and examined thoroughly. Starting from the location all the way to the number of bathrooms in the property – everything matters.
Secondly, the key to success in real estate is to keep adding value to the property. In order to survive in this business, one has to keep finding innovational ways to add value to their property and make it lucrative.
Finally, it’s important to seek partnerships and advisors at the very beginning of getting into real estate. In order to maximize the profits, investors need to surround themselves with experts in all areas, such as reliable builders, lawyers, and accountants.
Bottom line? There are numerous factors with a significant role in the real estate market. By getting to know current market trends, it will be easier to perform a proper evaluation of a potential investment.