What Factors Influence Real Estate Value?

When we say that real estate is a dynamic market, we mean that it is persistently changing. Certain factors cause these changes in this market. Let's talk about how real estate value is affected by some macroeconomic and microeconomic factors.

Government Policies

Government is a body that has the authority to govern a country and form policies that will be beneficial for its economy and people. But sometimes, they fail to perform that way show completely adverse results. Let's go through some of these macroeconomic policies and government tools that can affect property valuation.

 

• Interest Rate

The interest rate set by banks is to determine the cost of borrowing money from the banks. If you borrow some money from the bank, you will have to pay interest until you return the actual amount. 

The interest rate of a country rises, then the businesses limit their spending's in the market. People tend to save more as now borrowing money is expensive. The overall circulation of money in the market decreases. It would result in falling real estate value. And vice versa would be valid for a fall in interest rate.

• Tax Rate

The government imposes taxes to collect revenue so that it can be spent on public projects. When the tax rate rises, the investors are discouraged from work. The market operations halt, and the real estate values start falling. Falling interest rates will have opposite effects on the market.

• Subsidy

Subsidies are exact opposites of taxes. The government takes taxes from people. But, it gives relaxations in the form of direct payments to the people. So, they increase the real estate value estimate.

Demographic Trends

A country with a more middle-aged population will tend to invest more in the real estate sector. So, the real estate property value in such a country will be high. The incomes are considered in the demographic factors as well. If a country has a larger proportion of high-income people, its real estate value increases per year.

Location 

The location of a project affects its value. If a project or housing society is near the main road, and has easy access to the market, has sufficient greenery, its value would be high. On the contrary, a project with no such facilities will have a low property value. Therefore, you must always be very careful when choose your location for investment purposes. A person who chooses a good location for investment that has access to both inside as well as outside the city has higher rate of succeeding and earning maximum profits on investment. On the other hand, a person who choosing a bad location that is far away from the city and has no such access points can prove to be a bad investment in this regard.

Developments near the Project

A crucial development near the projects causes the prices to be sky-high. The airport shifting near a housing society or a fly-over can shot up the prices. For example, the expectation was that the real estate value would increase with Rawalpindi Ring Road development.

Foreign Investments

The foreign investments coming to a country are one of the factors influencing real estate value. If a country can attract more foreign investments, the real estate value will be high. For example, the development of Blue World City Islamabad is with the help of Chinese investors. So, its prices are experiencing increments. Therefore, we can claim that this is the best time for investment as it can provide investors with high profits on their investment in the near future.

 

Natural Disasters

The hitting of natural disasters can upset many industries, just like COVID-19. It caused lockdowns all around the world. Because of these lockdowns, people were not able to work. The money stopped flowing in the market. As a result, the real estate values fell. This means that the value of real estate is also dependent upon natural disasters and it can harm the value of real estate in unexpected ways.

 

Concluding, the real estate market is affected by several factors. We listed some of them. If you like the article, please leave below your feedback. As your feedback helps us improve and grow.