The success of real estate market is attributed to a number of poignant reasons that has to be considered to get a market rich with real estate investments.
We thought about underscoring the main aspects in the following part.
First: Supply and demand
In your journey to comprehend the concept of supply and demand, you will find that there are a number of key definitions you have to grasp first to be totally aware of the market components.
Before we start off with highlighting these definitions, it’s worth mentioning that supply and demand are considered the most effective stimulants of any real estate market. Market strength depends mainly on the equilibrium between supply and demand rates.
Demand: Figured out by defining the number of units needed to be purchased by the customers in all real estate sectors.
Kinds of demand: There are three main kinds of demand
1- The active demand: Demonstrated by the purchasing power in the market and it is considered an integral part defining demand.
By applying this concept to real estate, we could find that it is mainly represented in the sheer amount of calls on properties units or the pre-action demand.
2- The achieved demand: Demand that happens after client’s action. It differs from the prior kind as it gets affected by some variables like the lack of supply or the low amount of vacant properties.
3- The delayed demand: It is also called the unachieved or unsatisfied demand which wasn’t met by enough supply.
The strength of demand in real estate market is backed by population growth, economic development, and urbanization.
Supply: Supply in real estate market means the amount of available real estate spaces either in retail, residential, or any other sector in different prices.
The supply is split into two main sorts
1- Holistic long-rage supply:
The holistic long-rage supply is represented in the relation between prices, rents, and the total number of displayed units in the market.
This kind of supply isn’t really helpful in analyzing the market trends as it is hard to apply.
2- Holistic short-range supply:
Refers to the total amount of stock in the market during a certain point in time. The real estate market enjoys stability in stock amount for long periods when compared with other markets due to the delay of construction which takes long procedures of planning and development.
The delay of construction and stability of stock retains rental prices stable for long periods too. For example, if we assume that rental prices hiked by 20%, available vacant spaces won’t increase to take advantage of the rise, but on the contrary, the market will take a long time before making a reaction until new units are built.
Second: Diversity of investments
One of the main factors that contributes to developing the real estate market in any area is the diversity of investments between the three main sorts of real estate investments.
1- Properties trading: Has high risk but features high revenues. This sort is mainly represented in properties and lands speculation. The average rate of return from this sort of investment could reach 200% annually which is a bit higher than all other sorts.
2- Real Estate Development: Has moderate risk rate and boasts moderate returns as well. This sort is mainly represented by buying and developing land parcels by constructing residential buildings. The average return rate in real estate development could hit 30% annually.
3- Income generating assets: Features low risk and low return. It is mainly represented in buying properties for leasing. The average return rate for this sort of investment reaches 7% annually.
Third: Adapting optimal marketing methods
We have to differentiate between promoting and marketing as many people mix up and get confused between both definitions.
People falsely think that marketing is a part of promoting while on the contrary, promotion is only a part of marketing four main pillars.
The four pillars of marketing, as hypothesized by the American Professor Jerome McCarthy, are:
1- Product: It is the commodity displayed in the market
2- Place: The location of the product, or in our case, the property
3- Promotion: Promoting the product by all means to attract the customer and investors
4- Price: This axis represents the final price of the product.
When it comes to selling your property, there are two main marketing methods used in the real estate market that you should know about. In the following article, you will find a comparison of the two methods and their pros and cons.