Factors Affecting Residential Investment

Factors Affecting Residential Investment

Investing and making money from residential investment can be a major challenge and one that requires plenty of hard work as well as some level of intelligence. While this is the case, there are numerous investors who invest in the industry despite being fully aware of the cons and pros associated with the investment.

Success in the residential investment industry cannot be attained overnight as one needs to develop an investment plan and execute it properly to succeed. There are a couple of factors that affect investment in this industry and they include:

Social factors

Companionship and territory are some of the basic desires of most people. Prestige and cost of particular residential estates evokes in people the desire to purchase them.
There are also other social factors such as crime rates, age distribution and ownership pride which play a role in determining whether one invests in the residential industry.

Economic

The investor should check economic factors that influence their decision to invest in the residential industry. Some of the variable that need to come into play in this case include income levels and employment levels. These should be analyzed carefully. There are other factors that affect the decision to invest in this industry such as purchasing power, transaction costs, interest rates and wage rates. All these factors are carefully calculated by investors before they make their decisions.

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Interest rates

Interest rates have a huge impact on the decision of whether to investment in the residential industry. When there are changes in interest rates, an individuals ability to buy residential property is greatly influenced. When the rates fall, the cost of buying a home goes down as well and when the rates are high, the cost goes up as well.

Economy

This is yet another key factor that affects residential investment. The economy is measured using economic factors like employment data, prices of goods, GDP and manufacturing activity. From a broad view, when the economy is slow, investment in residential property is also at its lowest. While this is the case, the cyclicality of economy has varying effects on residential investment. For instance, hotels are sensitive to economic downturns as they can be avoided by customers if the economy is not performing well.

Government subsidies and policies

Legislation also affects residential investment especially in terms of property prices and demand. Deductions, subsidies and tax credits are ways that the government can boost the demand of residential property. When investors are aware of incentives offered by the government they are able to invest in the industry confidently.
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