In the current market, there are a lot of factors that go into how a property is able to be priced on the current market. From factors out of your control as a property owner to factors that you can control too.
Read on for an overview of how real estate in your area is able to be controlled and how you can best plan for this as a landlord.
How to form an overview of the real estate market in the local area
Finding an overview of the market is important for buyers and sellers to determine if buying is the right decision or they should wait for a different time.
As a property owner, here are the things I look for to work out what the market is like in the local area so I can minimise the risk I am taking on and know exactly what I am getting into as a landlord looking to invest my money.
Looking at the wider state of the economy
The macro trends of the economy on a national and international scale must also be looked at to truly understand where you should invest in property and when in your local market. It impacts what mortgage you take on and what type of tenancy to sign tenants with. In harsher times in the economy, you may not wish to sign tenants for a long period of time and you may be better off with an excluded tenancy.
This is because banks are the lenders of money and if banks are struggling to lend money then so will property investors and the real estate market generally operates in cycles where there are high and low inflation rates in this way.
For instance, in 2021, there was an extremely low interest rate on loans so a lot of people found it a great time to afford to buy a property. On the other hand, in 2023, the market has turned around and interest rates are very high so there are less buyers.
This trend isn’t just a national phenomenon as the trend is felt the same globally where banks across the world are trying to reduce spending by only offering mortgages with higher interest in an attempt to reduce inflation of assets.
Are there high inflation rates?
This is one of the first questions I ask myself in finding out the local real estate market value. While inflation is usually felt on a national and global level, you can also experience localised inflation where assets in a certain area seem to be over priced.
If it is the case that real estate is overpriced, it could be an indication to wait to buy or it could mean that you should buy to take advantage of lower interest rates yourself. It all depends on your goals and your tolerance for risk as a landlord.
Is a recession likely?
In 2023, it seems that a recession is more likely than ever. In property terms, this is not good news as a lot of mortgages are simply unaffordable. Recessions indicate higher interest rates and lower rates of spending.
Defining Market Conditions
In order to find out what the market conditions are like, there are a series of questions I ask myself including if the market is considered hot or cold right now and then going over the factors that influence this state of the market too.
Is the market hot or cold?
In a hot market, there are usually more buyers than there are homes for sale, which can lead to bidding wars and offers above the asking price. This can make it challenging for buyers to find a property that meets their needs and budget, and they may need to act quickly to make an offer before the property is sold to someone else.
In contrast, a cold market may have fewer buyers than there are homes for sale, which can lead to properties sitting on the market for longer periods of time. In this type of market, buyers may have more negotiating power, and they may be able to make offers below the asking price or request concessions from the seller.
It’s important to note that market conditions can vary by location, price range, and property type, so it’s always a good idea to work with a local real estate agent who can provide more specific insights into the market in your area.
What are the factors that make the market hot or cold?
As a property expert with years of experience, I’ve found that several factors can contribute to higher buyer demand for property in a particular area and a hot market.
One of the most important factors is location as areas that are close to amenities such as schools, shops, and public transportation tend to be more desirable to buyers.
Additionally, areas with low crime rates and good access to healthcare facilities can be particularly attractive to buyers because families want to be able to live peacefully without having to worry about their safety.
Another factor that can drive buyer demand is affordability where if an area offers homes at lower prices than neighbouring areas, it may attract buyers who are looking for more affordable options.
How this works on the other hand is if an area has a reputation for being high-end or luxury, it may attract buyers who are looking for these kinds of properties and hence attract a certain demographic and a more desirable crime rate and safer lifestyle will follow.
Is it a buyers or renter’s market?
There are areas perhaps within the same local market where there are a lot of people who want to buy because they want to live there for a long time and on the other hand places where the rental demand is high because people want to live for a short time.
Alternatively, rental demand may also be high if the area is very unaffordable so there are a lot of people who are priced out of the buying market but in general, areas with higher rental demand have higher demand because they attract people who want to live for the short term.
A good example of this is in property for students. Those who are renting as a student will definitely not buy firstly because they likely have no money in or to do so as they are just starting their careers but secondly because many travel to go to college or a higher place of education.
An area like this will definitely be a renter’s market where property owners buy property for a cheaper price (because there is very little buyer demand) yet are able to rent for a relatively high price (because there is a lot of rental demand).
This is an investment goldmine if it is your goal to be able to put your money into real estate and produce a return on your money without having to
What kind of market is better for investing?
It depends on your investment strategy whether you are going to invest in a renters or buyer’s market so it depends on your goals.
For instance, if it is your goal to sink your money into a property deal and produce cash flow every month as a return on your money then you should attempt to have your money in the renter’s market with a high rental yield.
On the other hand, for those who have a large amount of money and want to benefit from the appreciation of a property and don’t want to necessarily deal with tenants at the same scale, they can buy and sell later down the line.