Factors affecting housing prices

The factors affecting housing prices are very diverse and can be a long term investment for individuals and communities. Some of the basic factors that have a significant impact on housing prices are:

Factors affecting housing prices

 

The factors affecting housing prices are very diverse and can be a long term investment for individuals and communities. Some of the basic factors that have a significant impact on housing prices are:

1.     Supply and demand: Housing supply refers to the number of residential units that are available for sale or rent. Factors such as new construction, sale or rent of previous residential units and changes in the way residential units are used are the factors that determine housing supply.

 

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The most important factors that affect housing supply are:

- Number of new construction projects

- Renovation and renovation activities in the market

- Sale and rent of previous residential units

- Economic conditions and changes in laws and regulations related to the housing market

 

Demand in the housing market

Demand in the housing market refers to the willingness and purchasing power of people to buy residential units. Factors such as demographic changes, economic status and changes in lifestyle affect the demand in the housing market.

 

The most important factors that affect housing demand are:

- Changes in population and family structure

- Economic and income status of people

- The level of utilization of housing loans

- Attractiveness factors and accessibility to residential units

 

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The effect of supply and demand on prices

Supply and demand have a direct effect on housing prices. If the demand is more than the supply, the prices will soar. In this situation, buyers compete with each other to acquire their housing unit and this causes the prices to increase.

On the other hand, if the supply exceeds the demand, the prices will descend. In this situation, sellers are forced to lower prices to attract more buyers.

Due to the fact that the supply and demand in housing are variable and affected by various factors, the prices change dynamically and according to the changes in supply and demand.

 

2.     Geographical location: The role of geographical location on the price of housing is very important and significant. Each region and city has unique characteristics and advantages that can have a great impact on the price of housing in that region. We will examine some of the factors that have the effect of geographical location on housing prices.

 

- Location in the city center: Housing located in the city center usually has a higher price. This is due to easy access to city services, commercial centers, public facilities, restaurants and entertainment facilities. Public transports are more in these areas which is an advantage for many people.

 

- View and proximity to green areas: Housing that has a beautiful view and is located close to green spaces and parks, usually has a higher price. People value living in these areas more and want peace and nature around them.

 

- Nearby amenities and services: Housing that is close to needed amenities and services usually have a higher price. These facilities can include schools, hospitals, stores, restaurants and entertainment spaces. Easy access to these facilities is very important for many people and can have a great impact on the price of housing in that area.

 

- Security and quality of life: Housing located in safe areas with a high quality of life usually has a higher price. Factors such as low crime rate, good health, hygiene conditions, suitable public spaces and clean environment are very important for many people and are considered as a determining factor in deciding whether or not to buy a house.

 

- Access to public transportation: Housing that has easy access to public transportation usually has a higher price. This possibility is very important for people who use public transportation to get around and it has a great impact on housing prices in that area. The availability of bus, metro, train and other public transportation near housing can have a great impact on the quality and quantity of people's lives.

 

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- Infrastructure development and urban projects: Housing located near urban projects and infrastructure development usually has a higher price. These projects can include highways, bridges, urban development, commercial centers and other public facilities.

 

3.     Economic conditions: economic conditions play an important role in housing prices. Changes in economic conditions can directly and indirectly affect housing prices. Economic factors that can be influential are:

 

- Economic growth: Economic growth can create more demand for housing. When the economy improves and people's incomes increase, the demand for homes increases too which increases property prices.

 

- Interest rate: Bank interest rate also has a direct effect on housing prices. When the interest rate is low, the cost of borrowing a home loan is reduced and people can easily get a home loan. This causes an increase in demand and lead to an increase in property prices.

 

- Changes in the labor market: Changes in work can also have an impact. If more people have a job, their income will increase, their purchasing power increases too which may lead to an increase in property prices.

 

-Changes in laws and regulations: Changes in laws and regulations may have a significant impact on housing prices. For example, an increase in housing taxes can reduce demand and thus we will have lower housing prices.

 

4.     Government policies: Government policies can have a significant impact on housing prices. The government can take measures through its measures and decisions to control housing prices and facilitate access to housing for different layers of the society. Some government policies that can affect housing prices are:

 

-Tax policies: The government can be effective by setting taxes and tax exemptions for buying and selling housing. For example, increasing the tax on housing can cause a decrease in demand witch cause a decrease in housing prices. Application of tax exemptions for the purchase of housing can increase the demand and lead to an increase in housing price.

 

- Financial facility policies: The government can provide financial facilities such as mortgages with affordable terms. These facilities can encourage people to consider buying house witch results in an increase in housing demand and prices.

 

- Regulatory policies: The government can regulate housing prices by setting out regulations and laws related to construction and the housing market. For example, imposing restrictions on the number of housing units built or implementing laws related to the sale and rental of housing can be effective.

 

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- Infrastructure development policies: Government can provide facilities for housing construction by investing in infrastructure such as public transport and upgrading urban areas, thereby influencing housing prices.

 

- Interest rate adjustment policies: The government can have an effect on housing prices by adjusting bank interest rates. The government can take actions th  rough its measures and decisions to control housing prices and facilitate access to housing for different layers of society.

 

5.     Changes in the financial market: Changes in the financial markets can have a significant impact on housing prices. Some of them are:

 

- Interest rate: Changes in bank interest rates can have a direct impact on housing prices. If interest rates decrease, the cost of borrowing for home buyers will decrease and this can result in an increase in demand witch lead to an increase housing prices. On the other hand, an increase in interest rates can reduce demand and lower housing prices.

 

- Exchange rate: If the exchange rate changes, it can have an impact on housing prices. In countries where foreign exchange is influential in the housing market, an increase in the exchange rate can increase property prices, because the cost of construction and import of raw materials for construction and housing equipment increases too.

- Changes in the stock market: The stock market and the housing market are usually in direct interaction with each other. If the stock market grows and investors seek to invest in the stock market, it may also increase to buy housing and this can cause an increase in housing prices. On the other hand, if the stock market becomes unstable and investors pull out of the market to preserve their capital, there will also be a decrease in housing purchases which can lead to lower housing prices.

 

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- Government policies: Government policies can also affect the price of housing. For example, increasing the tax on the purchase of housing can cause a decrease in the price of housing. Changes in housing policies may also have an impact. For example, an increase in housing facilities can cause an increase in property prices.

 

-Inflation: Inflation directly affects housing prices. In fact, inflation increases costs and prices in the construction industry. Some of the effects of inflation on housing prices are:

 

-      Increasing construction costs

Inflation increases construction costs. An increase in the cost of raw materials, labor force and construction equipment causes an increase in the price of construction materials and construction costs which leads to an increase in property prices.

 

-      Increase in the price of land

The land price is one of the important factors in the housing price. Inflation increases the price of land. As inflation increases, the currency depreciates and thus the price of land increases. This increase in the price eventually leads to an increase in the price of housing.

 

-      Reducing the purchasing power of customers

Inflation reduces the purchasing power of customers. As prices increase, the value of money decreases and customers are unable to buy housing at high prices. This affects supply and may cause housing prices to fall. But in some cases, housing prices increase with inflation.

 

-      Impact on mortgages

Inflation has a direct effect on the price of housing. As inflation increases, the mortgage interest rate also increases. This causes more people to struggle to pay their mortgages and reduces access to mortgages and may reduce the demand in the housing market, as a result the price of housing will decrease.

 

-      Impact on investment in housing

Inflation can have an immense impact on housing investment. Due to the increasing trend of housing prices during inflationary periods, investors will be interested in investing in housing. This may cause an increase in demand and increase in housing prices.

 

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Solutions to face inflation in the housing market

To deal with inflation in the housing market, the following solutions can be used:

 

-      Inflation control

Inflation can be controlled through monetary and financial policies. The central bank and the government can take actions that are effective in reducing inflation and controlling it. These measures include increasing rates, interest, reducing money in circulation and reducing government spending.

 

-      Development of construction

Development of construction and increase in housing supply can reduce housing prices. The government and relevant organizations can take measures to encourage the development of construction and thus increase the supply of housing.

 

-      Reforming financial and tax policies

Reforming fiscal and tax policies can help control inflation and reduce housing prices. These reforms can include tax cuts and financial incentives for housing purchases which will increase demand and lower prices.

 

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Translator: Mr Saman Sayah