Real Estate Boom! This is not an irrelevant term in the Real Estate industry. Every broker/realtor loves to hear these words and consequently every investor and businessman in the country starts rolling his hands in glee at the prospect of a handsome profit. Sorry to burst your bubble, but that’s not what we’re talking about here.
The recent covert operation by the US in Pakistan to nab and exterminate Osama Bin Laden was the culmination of a decade long hunt and the result of which is a cry of relief amongst people worldwide who have been directly or indirectly victims of the War on Terror. On a lighter note, have you ever wondered what will happen to the Real Estate of that little town miles away from the capital? An IT consultant who had left the hustle bustle of the city to live in Abbotabad and was inadvertently live tweeting about the raid as it happened, is now aware that his little getaway will not be the sleepy town it once was. So will real estate prices in that town shoot up or is it just an silly guess? The truth of the matter is that market forces that govern trends are not always the same that feature in predictions and bar graphs. While it might appear flippant to be comparing events of such magnitude in terms of real estate trends, we must question the ground reality here.
Political factors have a direct effect on the growth of the real estate market. The effect of political factors on real estate depends on the state of the nation’s economy at the time. Remember, real estate growth coincides with economic factors which are in turn affected by political factors. How do political factors play into the real estate picture? The state of the economy is often the result of strong or weak political leadership and this makes a vast difference. There may be a weak economy with high unemployment and prices, but if the loan interest rates are low, the real estate market will not suffer, and thus, it will be a sound investment for investors. It is rare that real estate growth slows because of the economic conditions within the rest of the economic sector, but it may experience less growth than it would if economy were strong and reliable on the whole.
The effect of political factors on real estate can vary locally the same way that economy can differ between cities within a state. For example, if inflation rates rise, we see a trend that may have a detrimental effect on the real estate growth, especially with unemployment rates also simultaneously high. Even if interest rates remain low, the figure could increase and thus the real estate growth rate may decrease to accommodate higher interest rates. The real estate growth rate of rentals, however, will remain high, with tenants spending a large stake of their salaries on rent. Are these fueled by political factors? Time to sit back and think isn’t it?
When elections draw near, other political factors may present themselves as the nation looks toward either change or stability i.e. choosing between the opposition or the current ruling party. What effect these political factors will have on real estate will often not be obvious for a year after polls close. In the meantime, we as realtors and brokers must follow the current affairs and keep a close watch on political factors that could determine the security of real estate investments and real estate growth. Currently the market is still strong, and there is no reason to think it will not continue to be strong. The market is not volatile like other economic and financial markets, so it tends to stay reasonably strong, even when if other markets lose ground.
It is a known fact that the world real estate is the backbone of industry today even if it is the digital and virtual world of information technology. The future of the growth of any industry is directly or indirectly related to the real estate trends. One must as a professional realtor or broker stay attuned to international and national events and assess their impact on the market. We all were devastated by the effect of the tsunami on Japanese population from a humanitarian perspective, but as real estate professionals let us also dispassionately study the economical repercussion of such natural disasters in order to be able to better predict the constant changes in the global and local real estate markets.
This is imperative as destruction often heralds the creation of a new era and creation of new entities is the underlying force of real estate. In the light of the this, let us learn to be aware of and assess current affairs of both natural and political nature that are going to shape the industry directly or indirectly.