Real Estate Market

Real estate markets have some participants and they are owners, renovators, renters, developers, and the facilitators. With the popularity of internet facilitators like have become major players in the real estate market. While the demand side of the market comprise of owners and the renters, the supply side belong to the developers and renovators. Facilitators act as the medium to close the gap between demand and supply.

The usual microeconomic rules donít apply in its original form to the real estate market as this market has some unique characteristics. To understand the real estate market these characteristics have to be understood.

Real Estate MarketWhile the land is indestructible the building constructed on it also remains for decades and even centuries in come cases. Thus the durability is a big factor in the real estate market. So the market is less about selling new good but about changing hands of the existing properties. Only about 2% of the supply is from newly developed properties. Thus the role of portals like becomes even more important.

You will hardly ever find two land pieces exactly the same. This heterogeneity adds a new factor to the real estate market because there is no substitute for a piece of land. You may get a similar one but not the same. Also the buying and selling costs of real estate properties are relatively high compared to any other sale transactions. Also the process of arranging the finances and completing the documentation formalities is a lengthy process which makes this market different from others.

A very unique feature of the real estate property is that it is both good as an investment as well as consumption. This means it can either be purchased hoping a good return for the investment made or for own use, or for both the purposes. Virtually it is the only good which increases in value even after use. This factor indicates that even over-investment is not unusual for real estate properties.

Also a real estate being an immovable property the buyer has to come in search of the good unlike other markets. Hence there are less or so to say no physical market places at all in real estate. This means that the market is highly responsive to external factors affecting the location of the real estate.

The demand for housing and the main determinants for it are the demography. Factors like price of substitutes, price of housing, consumer preferences, income, cost and availability of credit, investor preferences and price of compliments all play a role. Various inputs like electricity, labor, building material, cost income etc are all the housing supply material. And the cost of these determines the supply.

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