This year, the conference offered valuable knowledge regarding the market drivers of real estate. According to Yardi, five key factors drive the real estate market - interest rates, inflation, compliance, sustainability, and workforce.
Let's explore each one in detail.
Interest rates influence both buyers and sellers. It impacts a person's ability to purchase a property.
If interests are low, a person can secure a mortgage easily at less cost. This increases the demand for properties.
Consequently, businesses can also secure loans at low rates for development purposes.
A low interest rate can increase demand and push up prices, too.
High interest rates lead to expensive mortgages. Demand for properties can decrease, resulting in lower prices.
The high rate of borrowing can also discourage development initiatives. Construction projects may be postponed or dropped altogether.
The economy of a country has a direct effect on interest rates. Moreover, factors like policies and government decisions influence borrowing rates.
Inflation plays a vital role in the success of real estate. High inflation translates to increased construction and labor costs.
Projects may be costlier than planned.
The high cost increases the price of properties and trickles down the buyers. This reduces the demand, and many units may be left vacant.
Consequently, high inflation may be favorable to real estate investors. It can act as a hedge in times of high costs.
However, this theory is being tested to the fullest in countries like the US and UK. Long years of inflation have forced the central banks to tighten up.
The situation can lead to a recession or economic slowdown. It is not beneficial for investors, businesses, or buyers.
A country's construction laws and building codes impact the real estate industry. They also influence how buildings are designed and how they operate.
Additionally, developers must comply with a range of regulations. The list includes zoning, safety, and more.
Currently, the focus is also on transparent governance and ethical practices. Green initiatives also rank high on the list.
Stringent regulations can discourage the growth of real estate. Moreover, changes in regulations can impact several aspects of a project.
Construction may be delayed or become more expensive.
On the other hand, favorable laws spur the growth of real estate. There is heightened activity in the development and rental sectors.
The situation also attracts more investments in the industry.
The challenges of climate change have made everyone aware of our duties. As a result, sustainability is a vital factor for investors and developers.
The current efforts prioritize creating resilient buildings. The rate of severe weather events like storms has increased manifold in the past few years.
Additionally, there is a substantial shift towards efficient buildings to save costs and reduce carbon footprint.
Sustainability has influenced most real estate and construction aspects, from materials to building design.
Additionally, the prices of materials like solar panels have increased due to high demand.
However, government subsidies and incentives are crucial to drive real estate growth. Developers may enjoy tax rebates or exemptions for adopting green practices.
Construction and real estate projects employ a broad range of professionals. The list includes painters, carpenters, plumbers, and more.
The availability of a skilled workforce is beneficial for the real estate industry. Developers can hire workers at deserving rates to complete projects on time.
Consequently, a shortage of skilled laborers can create challenges for developers. They may not be able to stick to the planned timeline.
Additionally, they may need to pay more due to increased labor demand.
The global workforce also influences the real estate market. For example, most people are not willing to return to the office even after two years after the pandemic.
This has forced many landlords to repurpose or stop renting office spaces.
Staying on top of market drivers is necessary to make the most of your real estate investments and projects. You should also rely on technology to improve your predictions and minimize disruptions. Assetsoft can help you choose and implement the right technology for your construction firm or real estate agency. Get in touch with us to discuss your project.