Did you ever think about the factors contributing to defining property prices and changing real estate indices from red to green every day? Well, you aren’t alone. It’s a common question that is asked frequently by most market observers.
A series of reasons, conditions, and transformations can drive the property prices to plummet or soar. These causes aren’t actually limited to one locality, in fact, they happen on large scale since most real estate markets are now strongly stringed with each other.
So, a slight rise in US property prices could result in stirring up the Middle East and GCC real estate markets. That’s how it goes these days.
Since 63 percent of HNWIs (High-Net-Worth-Individuals) in the Arabian Gulf region are looking forward to investing in vibrant property hubs like Dubai, Sharjah, and Abu Dhabi, we thought about offering support by demonstrating the main factors affecting property price movements in any market.
- Time of listing
There are times in the year when prices ascend a little, like spring and winter in GCC region for example, and other times when prices cool down.
The timing could increase or decrease the prices of properties by 20 percent, that’s why veteran investors tend to wait for the right time to conduct their property deal.
- Growth prospects
The prices could be largely affected also by the prospects of urban growth and development in the area surrounding a property.
If a certain major real estate development project or facility is prospected in a certain district, prices of residential properties in this district are likely to move up a little.
- Rental demand
If many people are looking for housing in a certain district, property prices there are awaited to get stimulated.
High rental demand means a higher return on investment and less risk of vacancy. This turns investing in purchasing an apartment a very lucrative option that’s likely to provide a quantum of advantages for the owner. As a result of the rise in rental demand, demand on investment will rise and therefore, prices will rise.
- Population number
The growth of population number in any district will absolutely stimulate demand rates and hence, result in a price rise.
On the other hand, deserted areas for any reason usually witness a steep drop in prices.
- Overseas investors
The entry of foreign investors in large numbers can make major alterations in any market. Property prices will soar, rental prices also, and the market situation could get bit difficult for local investors.
Dubai sets a very brisk example for that. After passing the property freehold law in 2002, prices boomed by an unprecedented rate as huge values of foreign investments were pumped in the market causing the whole real estate landscape to change forever.
- Government decisions
Legislation passed by any governmental authorities is also another significant factor that could impact property prices and demand rates as well.
Subsidies, deductions, new taxes, etc. these are some means governments usually use to boost or limit demand for properties.
Saudi Arabia, for instance, witnessed the issuance of a new tax imposed only on vacant lands. The new tax was meant to break lands monopoly in the kingdom, decrease property prices, and energize real estate transactions activity.
Prices did drop, however at a slow rate, as planned after the new tax was officially passed by the government. Even lower dips in prices are expected to take place in the future.
- Job growth rate
Another important factor in the pricing equation of real estate market is the rate of jobs creation. Areas, where plenty of commercial enterprises are being established, can witness price surges.
Dubai authorities, for instance, made it easier for international companies to open new venues in its business hubs. This attracted many job seekers and boosted the occupation rate around the city, even contributed in bolstering the current superiority of Dubai real estate market within GCC region.