{"id":38847,"date":"2020-07-21T08:46:21","date_gmt":"2020-07-21T06:46:21","guid":{"rendered":"https:\/\/www.getsmarter.com\/blog\/?p=38847"},"modified":"2025-10-07T11:56:17","modified_gmt":"2025-10-07T09:56:17","slug":"factors-affecting-the-real-estate-market","status":"publish","type":"post","link":"https:\/\/www.getsmarter.com\/blog\/factors-affecting-the-real-estate-market\/","title":{"rendered":"Factors Affecting the Real Estate Market"},"content":{"rendered":"\n

The real estate market is one that is constantly changing, molding and reforming each year as the world around it does too. When looking at the factors that affect residential and commercial real estate, there are four that stand out: government policies, socio-economic factors, demographics and technology. With these key factors, knowing what to look for and how to use it to your advantage could save you time and money \u2013 whether you\u2019re looking to invest or develop.1<\/sup><\/p>\n\n\n

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Government policies affecting price and demand<\/h2>\n\n\n\n

An important factor to look out for when considering investing in property is government policies. Legislation can have a considerable effect on the price and demand of property. There could be a temporary boost in demand for real estate by government influence through tax credits, deductions and subsidies.2<\/sup> It\u2019s important to understand the current political climate<\/strong> in order to identify changes in supply and demand, and make smart investment choices<\/strong>.<\/p>\n\n\n\n

Additionally, be wary of the legitimacy of your information. This will prevent you from falling for false trends or failing to read the fine print, such as with the 2009 U.S. first-time home buyer\u2019s tax. This was a refundable tax credit offered for a limited time to Americans purchasing their first homes.3<\/sup> This attempt to jump-start home sales worked temporarily, but only as a result of the tax incentive for that particular year, a fact that was not known to many.4<\/sup><\/p>\n\n\n\n

A more recent blow to the real estate market comes in the form of the United States government shutdown. The shutdown negatively affected over 800,000 federal workers in nine different departments and agencies, including the Housing and Urban Development sector.5<\/sup> A study of 2,211 members of the National Association of Realtors showed that 11 per cent of respondents reported that the shutdown had an impact on their current clients and 11 per cent claimed there was an impact on their potential clients. Of those affected by the impact, 25 per cent had buyers that refused to buy property, due to government uncertainty.6<\/sup><\/p>\n\n\n

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Socio-economic factors affecting the real estate market<\/h2>\n\n\n\n

The relationship between economic conditions and the real estate market is significantly reciprocal.7<\/sup> However, a dip in the economy may not affect everyone in the same way. In fact, through strategic planning and being aware of factors such as construction costs, inventory mixes and seasonal trends, there are opportunities to invest in a worthwhile property.8<\/sup> While a struggling economy may not be a welcome sight for most, it does ensure there are available bargains for investors<\/a> and first-time buyers in areas where there may be significant property price drops.9<\/sup><\/p>\n\n\n\n

Knowing what kind of commercial property to invest<\/a> in can help you avoid the backlash of a bad economy. For instance, an investor who has a predominant ownership of hotels would typically be more affected by a recession than an investor who has invested in office buildings. Hotels generate income from short-term leases that are easily avoided when there is an economic downturn. Alternatively, office tenants require long-term leases that are not so easily changed on a whim.10<\/sup><\/p>\n\n\n\n

In addition, a basic understanding of interest rates, and how the economy can influence those rates, makes a financially stable decision much easier, such as choosing a mortgage. Typically, there are two kinds of mortgage rates \u2013 fixed rates and adjustable rates. Fixed interest rate mortgages have a shorter lifespan, but the interest remains fixed for the entirety of the mortgage\u2019s lifespan. The interest rate on an adjustable rate mortgage can change monthly, depending on the terms of the mortgage.11<\/sup><\/p>\n\n\n\n

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