It might be assumed that the housing sector of the economy is a crucial aspect to consider while assessing the state of the art of a country. Hence, it is essential to understand the factors that affect this part of the economy to predict shifts that may cause substantial changes. Recently, several scholars and officials claim that there has been a shortage of houses in the real estate market. Thus, an explanation of the critical points of housing demand, as well as reflection on the mentioned shortage, might be relevant matters to present in the discussion below.
Determinants that affect housing demand might be described as follows. The affordability of houses and economic development of the country might be quite intersected factors. When the incomes of citizens tend to grow, and the government offers favorable living conditions and a secure future, people want to increase their level of comfort. The above aspects stimulate buyers’ confidence, which leads to consumers’ willingness to buy.
Meanwhile, the number of potential buyers also matters as population growth increases demand – it is a simple quantitative factor. Then, interest rates affect citizens’ ability to buy houses as they define the prices of mortgage repayments. Mortgage availability is another determinant that means the willingness of various banks to give mortgages to potential buyers of new homes. Finally, the cost of renting has a significant role in the determination of housing demand. If these costs rise, households make substantial efforts to buy accommodation because purchasing a house with the help of a mortgage starts to be relatively more affordable.
The growing popularity of real estate investments for rental purposes has reduced the number of affordable housing for residents. In recent years, investors have bought a reasonably large part of attractive properties in the lower price segment of the market. At the same time, buyers with a long-term investment strategy hold housing for a long time and put it up for sale infrequently. It reduces the options for those who are going to buy a house or apartment for personal residence.
Moreover, factors such as concerns about personal finances and the availability of loans lead to a reduction in offers in the housing market. It results in the fact that potential sellers of houses abandon plans for improving housing conditions and relocation, preferring to stay in place. Then, plenty of seniors tend to age in their inhabited homes, which has contributed to the supply shortage that hinders the market. All these factors indicate that the excess of demand oversupply in the real estate market will continue in the long term.
Even though the global economy is not at the peak of its development, the number of individuals and families who can afford to buy a new home is increasing. It happens due to gradual economic growth and the gain of the wealth of the ones living in developed and developing countries. Keeping in mind all the listed above aspects of the housing market, the fact that a houses shortage in the real estate market is taking place might be considered as reality.
To sum everything up, the factors affecting housing demand are affordability of houses, consumers’ confidence, mortgage availability, country’s economic growth, cost of rating, and population. Several issues that affect the modern real estate market to a great extent were identified. It was supposed that due to the listed factors, the housing sector of the economy might be characterized as the one in which demand exceeds supply.