The decision to purchase real estate is a significant one for any investor, and it is also an investment that will cost the investor a significant amount of money. As a result, before making a purchase, the investor must conduct comprehensive research to ensure that no costly mistakes are made.
If you are considering investing in a new market or area, you should ask yourself several questions to decide if the moment is appropriate. Here are 9 important things to consider when analyzing a new real estate market for investment:
1. Supply
When real estate is in short supply, you can expect prices to rise sharply as long as there is sustained demand. Some of the main things to consider with regards to supply are the existing unsold inventory in the area, number of new units under construction, availability of land, and the availability of other forms of real estate that can be converted to the type of real estate you are interested in purchasing.
2. Demand
As more buyers enter the market, so does the demand for real estate. Demand for real estate in an area increases due to population growth as a result of birth or migration of people from other areas. People generally migrate to a new area for better economic prospects, and a better overall quality of life.
3. Government Leadership and Policies
Enterprising Government leadership that is pro-business and focused on infrastructure has historically been a boon for real estate prices. A good Chief Minister, Mayor, or Municipal Corporator can thus play a big role in the outcome of your investment. Tax credits, deductions, and subsidies are some of the ways the government can stimulate demand for real estate in an area. Being aware of current Government incentives can assist you in determining changes in supply and demand and identifying possible future trends.
4. High Paying Jobs
The presence of employers in high-paying fields such as tech and finance can lead to the migration of young people to the area. It is estimated that one such high-paying job in an area can also create demand for up to five more service-related jobs including opportunities for financial advisors, teachers, beauty specialists, and restaurant workers.
5. Infrastructure
Infrastructure is a crucial engine of a region’s economy and is known to have a significant impact in influencing the value of real estate in any given location. Future plans for the development of a new airport, expanded train lines and highway connectivity can greatly increase the price of real estate in an area. When a location lacks road, rail, or air connection, property prices in the region are lower than in places with excellent physical infrastructure.
6. Climate
Locations with pleasant moderate climates tend to attract people and companies. As a result, population and economic growth rates are greater in these locations. Areas with lower humidity are also preferred to high humidity areas. The quality of the air and water may also have a significant influence on real estate values. Cities with poor air or water quality are less appealing and may face population and value declines in the long run.
7. The Economy
The overall economic health of the country that you are looking to invest in is another important element that influences the value of the real estate in an area. Economic indicators such as GDP growth, unemployment rates, inflation and so on are commonly used to gauge the pulse of the economy.
8. Rental Yields
Savvy investors tend to keep a keen eye on the existing rental yields in an area. High rental yields combined with low mortgage interest rates can serve an investor well. There is usually steady demand for properties in areas with high rental yields as they are popular with retirees and other investors who are looking for income.
9. Property Rights
Finally, property rights in the country where you are looking to invest in is another important factor to consider when analyzing a new market. Strong property rights make people comfortable investing in a country and reduces the investor’s legal risk and due diligence costs. In general, banks and financial institutions in these countries are also more willing to lend towards real estate purchases.
