Real estate market - introduction
The definition of the real estate market differs from one corner of the world to another, but they share some common features. This means that no matter in which country we are dealing in we are still aware of its main parameters. However, let us start with the meaning of the word ‘market’. Basically, the market is an economic category that denotes the entirety of exchange relations between the sellers, who represent the supply, and the buyers, who make the demand and build the demand for specific goods or services. It is worth noting that these relations may have diverse contents and concern many varying aspects. The participants involved in this peculiar exchange decide on demand and supply. However, we do not refer only to the price or value of a given good or service. The decision to enter into a transaction is influenced by other factors, economic, psychological or social. This means that the essence of the market cannot be identified with the market mechanism, the functioning of which is only its subjective aspect. So what is the market in a few simple words? It is a place where someone who is looking for a given good or service searches for someone who will satisfy their wants. There has to be a kind of bond which allows us to realise that we buy something from the person for a set price or value, while that person is happy to accept that given price for the good or service they provide.
When considering the definitional meaning, we can get the impression that it is the action and interaction of people involved in buying, selling, exchanging, using or developing real estate. Exchange relations include the disclosure of the intention to buy, sell, rent, or lease by various entities (subjective approach), or renting and leasing of various types of real estate (objective approach), the confrontation of aspirations, as well as a bidding mechanism involving the negotiation processes. In addition, the transfer of rights and shares in the property takes place and, in the case of land, different uses are transferred. Each transaction also ends with the determination of the final price for which the above-mentioned rights will be acquired. Individual transactions concluded in a given area (region, country, continent) are the building blocks of the value of the real estate market we are considering.
Everyone who starts their adventure with investing should consider how they want to arrange their investment portfolio. There are many methods and schools of thought as to what assets we should own. It can be stocks, bonds, cryptocurrencies, precious metals and much more. It is also worth noting that in most portfolios, real estate has a strong presence. Why? Real estate, due to the fact that it is not a speculative asset but rather a long-term one, and given its low volatility in terms of price, forms the foundation of a well-tailored investment portfolio. Their risk is estimated to be much lower than that of shares or precious metals. In addition, returns are generated from two sources. Firstly, we earn from renting, if we decide to do so. With Terra Land, we have the opportunity to earn passive rental income from the first dollar invested, as profits are distributed in proportion to the percentage of ownership of the property. An additional added value, the second source of possible income, is the increase in value of the property over time, which we will enjoy when we sell. Of course, there are also discounts on properties and their prices may fall, so they should be considered as long-term investments. There remains, of course, the income from rent. Due to its stable nature, it is very important to ensure the presence of real estate in one’s investment portfolio.