Real estate market - main features
The real estate market has many important characteristics, some of them are shared with other markets, while others apply exclusively to it. We will focus here on some of the most important elements. The real estate market is fundamentally imperfect. This does not mean that it should be avoided, quite the contrary. Imperfection is inherent in many areas of our lives. This is solely due to the lack of very detailed information about it. Each property regardless, of its type, must be considered individually. It has its intrinsic positive and negative characteristics. We certainly cannot judge one property solely on a similar one that sold next door. It may have looked identical from the outside but the detailed features were different. We can consider this using the example of a flat in an apartment building. There are two identical units available in the same building on the same floor with the same liveable area. It would seem that they should have the same value. However one of them faces south and the other faces north. If someone is looking for a sunny flat (in the northern hemisphere) they will consider the one facing south, while the one with a northern orientation would not be considered by them. Hence the imperfection of the real estate market is caused by the lack of repeated rules we could use to evaluate properties. Because of this element, it is impossible to reach an equilibrium, but it will also cause relative stability of prices. Property prices do not react to short-term market changes and are resistant to speculation.
The real estate market is characterised by low price elasticity for both demand and supply. This is due to the fact that there is no substitute for real estate. As far as the low price elasticity of supply is concerned, a property sold rarely comes up for sale in the short- to medium-term. Rather, it is a long-term investment and often linked to a mortgage when we look at the housing market in particular. The seller is aware of this and if the property has no significant defects then he will want to achieve the best possible price for it.
Another characteristic of the real estate market is the requirement for its professional handling. People operating in this area must have permits, as in the case of developers, or licenses when we talk about real estate agents. This is a great added value when viewed from the buyer's perspective. The purchase is connected with very high costs and it is worth being aware that the person who is helping us knows and has the necessary competencies to handle such a transaction. Legal regulation is also an important element. A well-functioning real estate market provides legal protection for both buyers and sellers. Notaries verify the accuracy of documentation and entries in land and mortgage registers confirm ownership. It is important to carefully read the required documents and make your own research.
The real estate market is also characterised by the property's local character. This refers to permanence. The property is located in a specific place and it is difficult to change its location (sometimes it is possible, but it requires additional financial outlay). It has a social, demographic, legal or political impact. It is important to carefully consider the environment to see if it will affect you positively and ensure comfortable use. Sometimes there are situations in which the influence of external factors has a very negative impact on a property. It is worth paying attention to this during your search and checking whether a motorway will not be built outside your window.