The division of the real estate market

What does the basic division of the real estate market look like?

Taking into account the most important issue concerning ownership, we can divide the real estate market into:

• the investment market, where the transfer of ownership or similar rights takes place,

• the rental market, where contracts are concluded defining the manner in which the property is held, but without transfer of ownership or similar rights.

In the case of the deposit market, the purchase involves the physical acquisition of rights to the property in question. You become the owner and enjoy all the privileges and obligations that come with this. This is related to the desire to own one's own property, whether for private use, when for example we want to live in a house we have bought, or whether we treat the purchase as an investment and want to make money on it by renting it out or increasing its value over a set period of time.

The rental market is inextricably linked with the deposit market. Someone who has decided to acquire rights to the property and holds the title deed decides to cede some of the privileges to the other party. Most often he or she receives remuneration for this in the form of rent. In return, the renting party receives access to the use of the property he or she is interested in. It may be a flat on the top floor of an apartment building in the city centre or a summer house by a beautiful lake. Commercial rental, which we write about later, is a very strong driving force of this market.

What other real estate market segments exist?

The real estate market can be divided into many sub-categories. Here we would like to present some of the most important ones. They function most frequently and help to better understand its idea and definition. The first subdivision we consider is the purpose of real estate. We can distinguish the following subcategories:

• The residential real estate market, including all houses for residential purposes that are not rented out and are not intended to bring profits to the owner – this is the largest segment and an accurate estimation of its size is extremely difficult. The estimated value is over 258 trillion dollars! It should be noted that this is also the most dynamic area for several reasons. The growing population forces the construction of more and more properties. The increasing affluence of the population also strongly influences this element. People simply want to live more comfortably and have more living spaces available. Location is also important, which cannot simply be moved or relocated, and the most attractive ones are already built. This causes an organic increase in the value of such property over time;

• The commercial real estate market includes all properties which are capital investments, sources of income and profits for the owners. Most often, apart from flats and houses for rent, this area includes office spaces, spaces in shopping centres and warehouses, or other commercial buildings. All hotels and holiday flats also fall into this category. This is where Terra Land sees an opportunity to achieve attractive rates of return for its customers. Despite the pandemic, the attractiveness of rentals is not declining; tenants' expectations are changing – becoming more stay-at-home focused. Larger spaces with a sense of space are becoming increasingly popular;

• The industrial real estate market, as the name suggests, refers primarily to factories and areas containing natural and fabricated resources. This includes everything from a small factory on the outskirts of Athens to the world's largest mines (https://en.wikipedia.org/wiki/Bingham_Canyon_Mine);

• The agricultural real estate market, which includes agricultural land, pastures, orchards or forests for the purpose of growing food or building materials. Due to the fast increase in the world's population, more and more agricultural land is being converted for residential, commercial or industrial use. This brings with it risks, such as the loss of farmland or the conversion of natural areas into fields and meadows;

• The special real estate market, which includes, for example, cemeteries, parks, forests or military bases. This is a special category that is most often owned by states or other organisations and which uses its property in ways other than residential or commercial.

Another classification is the spatial criterion. The following division can be distinguished here:

• local market - the closest market to our location, as it encompasses what is within the range of our closest environment. This may be the area of, for instance, a city or the closest suburbs;

• regional market - covers larger areas. It may be, for example, a state, area, or simply a locality;

• domestic market - covers the area of a given country;

• international market - covers an area of several countries, a continent or even the entire world. It is usually the inverse of the regional market;

Very often we also hear about the division of the real estate market into:

• The primary market, and;

• The secondary market.

These denote both unowned and preowned residential properties, respectively. When acquiring a new property from a developer, we participate in the primary market. Buying a house with an ownership history, outside of the property developer, is classified as the secondary market.

The sum of all aforementioned subcategories is practically the whole real estate market. Many factors affecting the entire area are reflected in the pricing of individual properties.