3 Key Factors Affecting The Real Estate Market

With the global economic impact of the pandemic, you would have thought that the real estate market would have taken a nose-dive. On the contrary, the gains made in the period and two years later prove that the sector appreciated and real estate investors made impressive gains. For example, in the UK, real estate prices rose by 8% from April 2020 to March 2022. There are some influencing elements that account for this and the sector in general. The following are key factors affecting the real estate market.

1. Availability of mortgage finance

A major economic tool used to predict future borrowing is mortgage approvals. In the UK, this fell from 65,681 to 63,726 within one month (May to June 2022). This means that the number of mortgage approvals for real estate purchases has reduced. Whenever this happens, it poses a huge disadvantage to first-time buyers who must go through the mill to get approved. Real estate expert Armand Candea stated that the affordability crisis is an issue first-time buyers face.

The era of stricter lending has been an issue of concern in the United Kingdom, and people can only hope it gets better. Thankfully, with resources like Loan to Value (LTV) loans, first-time buyers may not have to stress about the availability of mortgage finance. Additionally, they will have the increased advantage of owning a real estate property. According to data, the value of owed mortgage loans stood at £1,630.5 billion in March 2022. If that is anything to go by, it means a possibility of stricter lending, which will have a ripple effect on the availability of mortgage finance. 

2. Demographics

Factors like age, race, income, gender, population growth, and migration patterns influence the real estate sector. Other elements are crime risk in a specific location and quality of education play a significant role in what has become known as demographics. 

In the United Kingdom and everywhere else, significant demographic changes can influence real estate trends for a long period. For instance, when the UK housing crisis peaked in 2016, then Prime Minister, Theresa May, announced that one-third of the problem stemmed from immigration. Indeed, she was right, and her comment only proves that shifting demographics can significantly affect the real estate market.

3. Interest rates

For many real estate investors and buyers, the interest rate subject is a lifelong love-hate relationship in the sector. Any change in interest rate can significantly impact your buying power. When it goes low, demand on the market is higher, which shows in the cost of obtaining a mortgage. It works the opposite way when interest rates go up. Indeed, a continuous cycle of ups and downs goes a long way toward determining what happens in the real estate market.

However, if you are interested in real estate and are considering investing, it would be best to learn the dynamics first. It is worthwhile to be better informed, especially regarding money matters. These tips are a few to get you started.