The demand for real estate properties exists due to the interest shown by people (users or renters, buyers, and investors) in using properties for various purposes. Within the rental market, people who regard properties as an investment usually supply buyers with properties for personal renting or concession purposes.
As buyers operate in the real estate market on the demand side, they automatically generate and influence demand in sales within each specific urban and rural area. The factors that influence the demand for real estate properties are as follows:
1. Demographic factors
Demographic factors and elements of a local nature may influence the demand for property and real estate services; examples include but may not be limited to demographic factors such as migration, birth rate, and mortality which usually affect the amount of real estate properties needed to accommodate the population.
The sizing and allocation of the areas needed for housing, factories/industries, and the sale of consumer goods is a function of the number of people living or residing around sites allocated for housing and sales of properties. The availability of raw materials, transport facilities, and skilled labor could also influence decisions regarding the location of houses, factories, and industries.
Demographic factors cannot be completely separated from economic factors which obviously affect variables such as marriage rates and migration. Research has proven that countries undergoing economic development always experience an increase in marriages and immigration. So, changes in population influence changes in demand and the size of the housing, as families and individuals are the main consumers of real estate.
2. Political factors
Governments usually have interest in real estate, identify social values with housing and, depending their respective intentions (for example, to facilitate buying of houses, encourage businesses, etc.), they take certain actions and implement fiscal and administrative policies—sometimes, conflicting ones—which end up promoting and influencing demand and even supply.
Oftentimes, the uncertainty of political systems regarding the implementation of actions and the accompanying disorientation of economic operators dramatically reduces the desired effect of governments’ actions. It may be important to note that governments’ respective administrative decisions on tax matters could facilitate and also influence demand for properties and investment purposes.
3. Economic factors
Economic factors cannot be discussed without mentioning property users or renters, buyers, and investors. When analyzing demand, it is important to distinguish between people who are interested in purchasing or renting property for personal use, and people (such as investors) who are interested in using property specifically to gain economic advantage. The interest and economic goal of using properties vary from person to person and generally influences the demand for properties.
4. Sociological factors
Sociological factors—and even cultural ones—definitely influence the needs of individuals in any locality, region, or country, and affect housing demand for quality, along with the functionality and appearance of individual buildings, as well as the purposes and times for using various kinds of buildings.
The changes in the needs of individuals are often stimulated by technological innovation/development and hence economic factors, and the evolution and consequences of social and cultural changes influence demand and cause changes in the real estate market.
5. Technological factors
Technological innovation and development directly and indirectly influences the demand for real estate. The availability or accessibility of new techniques, technology, or functions has a direct impact on demand for real estate. Also, improvements in transport systems provide alternatives for real estate housing and allocation, and developments in agriculture, medicine, industry, and communications technology have indirect effects on the housing market and general demand for properties, and are sometimes reflected on the sociological and demographic components as well.
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