It is not a hidden fact that the real estate sector has a massive role in the upliftment of society. It contributes to the transition of wealth from low to medium to high-income communities. As a result of such contributions, the real estate market has emerged as the best investment option.
Various factors are responsible for giving a massive push to the estate market. They include job creation, which facilitates relocation, small families, and lower interest rates. Earlier, few banking organizations catered to home loans or any types of property loans. However, with massive expansion in NBFCs and Banking organizations, everything changed.
Real Estate Market Growth Factors
Today, consumers are well-educated and aware. So most are heading towards renowned developers. It has direct implications on the quality of the property one is investing in. Property acquisition has become relatively easy today. More options and easy loans are the major precursors. Here you will know in detail what reasons drive the property market.
Low Interest Rates
Interest rates hugely influence the real estate sector. It is a known fact that people will not spend their savings to buy property. So, taking loans is the best way out. Several factors impact the interest rates. If you go for high-value property, you will be saving more in the long run. Flexible loan tenures add to the benefit. Now, you can plan your budget accordingly.
Some people buy homes for investment, too. In their case, once the property value increases, they sell them off. Thus, making profits on and above the purchase price. In reality, it does give more returns than average savings in a bank would.
Considering, you have shortlisted some locations for a property, the next step is to visit the construction sites for a survey. The moment you enter the site, things such as proper safety signage, fire exits, waste management signs, security, and CCTV signs will influence your outlook. Also, the use of safety equipment on construction sites is a sign that you are in the right place.
Once any property is complete, you cannot measure these facets. The site should be secure as well, with proper wall fencing, fire signs, and equipment. Good quality will affect the price appreciation in the years to come. Developers who take these into account contribute to the economy on a large scale.
You will find that more job creation leads to an increase in buying power. Apart from that, most MNCs are coming up in the urban areas and suburban areas, too. Thus, people are looking towards relocation. A change in mindset has led to millennials leaving homes for greener pastures.
Going back to the baby boomers, they are retiring or on the verge of retirement. A large chunk of this population is looking for new homes which promise better amenities than their existing ones. Thus, it affects the real estate market as a whole.
The government has also formulated several plans like the first-time home buyer’s tax credit to revive the economy. When it started, around 2 million people availed themselves of this concession. Other offerings from the government include subsidies and deductions. Although temporary, it leads to a sudden movement of the property buying graph upwards.
First-time home buyers in the U.S. can withdraw IRA funds as well, without penalty. The other tax benefits include Home Mortgage Interest Deduction. Thus, tax deductions from the final income of a buyer gain favor here. Other concessions include a deduction in loan processing fees. The list does not end here. Buyers also get residential energy credit. It applies to those who get solar-powered equipment installed.
When supply is more than the demand, prices will fall. Everyone knows this. The same happened to the U.S. property markers between the end of 2019 and mid-2020. Moreover, in the past, people had to bid for the property. There were more takers and less supply. Thus, the real estate scenario currently is a reflection of the pandemic-struck circumstances. Developers want to clear stocks as early as possible.
Is the Real Estate Boom a Bubble?
Many market analysts believe that the current boom is a bubble. And it will fizzle out soon. But the reality may not be so. Moreover, new developers are entering the markets with lower prices. Thus, bringing prices down. Many developers have commercial property lying in a state of despair. It is due to the lack of industries after the pandemic. Many businesses have also shut shop. Here again, new players are taking leverage and buying those at low rates.
You may conclude that the boom is for real. With recovering economy, new job creation, and tax concessions, people will look forward to investments in the real estate sector.