A lot of people wonder at the direction of the housing market, trying to predict it, while others struggle to understand its current state. This, nonetheless, is completely impossible without understanding the basics of how all of this works. Needless to say, this is something that’s important for both homeowners and potential investors. Therefore, here are some basics you need in order to understand the housing market.
1. A limited supply
The first thing you need to understand is the fact that this is a market with a fairly limited supply. Sure, there are houses everywhere but the amount is limited and, usually, fairly small when compared to the number of interested parties. Due to the fact that the location is one of the predominant factors in both appeal and the value of the property, the supply is even more limited.
Namely, there are only so many residential homes in a certain area, let alone those that that satisfy the criterion of the buyer. This is why it’s not so uncommon that a certain home will have multiple bidders at the same time, some that are so interested that they’re willing to make a preposterously large offer. Due to the fact that these offers are much higher than what’s expected, they can sometimes disrupt the micro-market.
Of course, this often happens when these decisions have the purpose, instead of being impulsive. This is also why having a professional aid should be a must. Let’s say you aim to bid on a property in NSW. In that particular scenario, consulting property valuers in Sydney would be the most logical choice.
2. Most important factors
When it comes to the factors that influence the price, there are several things to consider. From the standpoint of a homeowner, the most important factor is economic stability and employment. You see, the main reason why millennials refuse to buy homes is due to the fact that they don’t want to accept a debt of 20-30 years if they aren’t sure they’ll be able to return it.
Other than this they don’t want to be tied down to the place if they aim to move in the nearest future. Since digital nomadism is getting more and more popular as a trend, this matter will only get worse over the course of time. In other words, in a stable economy with a low unemployment rate, the desire of people to live in their own homes might start rising once again.
3. Unpredictable market cycle
Finally, there are some industries in which a market cycle can be expected, however, the housing market is not one of them. This is due to the fact that there are so many different factors affecting it, starting from the influx of foreign capital (as is currently the case in Australia, with Chinese investors), all the way to more localized trends. Of course, no trend lasts forever, yet it’s impossible to predict if the trend of growth/decline will last for a couple of days, weeks, months, years or even decades. Still, waiting for a change in the nearest future isn’t unrealistic, due to the fact that the market does appear more volatile in the 21st century.
Once you understand these three basic principles, you’ll have a much easier time to differentiate a good offer from a bad one. A decision that’s based on data and information is much more reliable, as well as more likely to result in a positive ROI. Sure, knowing basic terminology doesn’t make you an expert on the topic, yet, the more you know, the better your position is. Now, at least, you can begin to unravel this mystery that is the housing market.