The Property Barometer: indicators of an upturn
Category Blog
One of the most useful industries to study during the ups and downs of an economy, is the property industry. As a result of the specific nature of the industry, it can provide insights into the broader economic landscape, reflecting on trends not only in the housing market, but also across general construction activities, commercial real estate developments, employment and investment, as well as consumer confidence.
Playing a pivotal role in reflecting the health of an economy, it serves as a multifaceted and reliable indicator of upturns and downturns, offering a comprehensive understanding of the broader economic landscape - an understanding that helps policymakers, investors, and the general public in making informed decisions.
Trends when an upswing in the economy begins to affect the market
The housing market: This still remains a clear indicator of market conditions. A thriving economy often translates into increased demand for housing, leading to rising property values and robust home sales. Even though prices are climbing, sales activity can increase because people begin to feel renewed confidence in the future.
Interest rates: During an upturn, interest rates decline, and purchasing a home becomes more affordable. Developers and investors are encouraged, and construction initiates a flurry of activity, thus driving employment and economic growth. Along with an increased demand for housing and commercial properties comes positive expectation and willingness to invest in new projects.
Infrastructure: Noticably, during economic upturns, governments and private entities tend to invest more in infrastructure projects, increasing the construction of roads, bridges, and public facilities - all of which stimulates economic activity and job creation - which in turn acts as a barometer of an upturn, while at the same time contributing to that upturn.
Employment: One can hardly argue against the fact that the number of jobs in the construction sector is a key indicator of economic health. And in tandem with that growth, there is usually a greater demand for office space, retail outlets, and industrial facilities, further building business confidence and improving investment sentiment.
Rentals: A robust market will always bring with it rising rentals as the need for residential spaces becomes a clarion call. In addition, a decline in commercial space indicates a higher demand for businesses seeking to establish or expand operations, as well as a willingness to pay more for prime locations - proving that property remains a real reflector of business confidence.
Borrowing: For a quick picture of the status of any economy, one can take note of an uptick in bond approval rates, signalling increased confidence among lenders and borrowers. Financial institutions are more willing to extend credit during economic upturns, facilitating property transactions. Loan delinquency decreases as borrowers become more financially stable and can meet their financial obligations. This is always a positive sign for the economy, as it reflects a healthy lending environment. In addition, increased investment in Real Estate Investment Trusts (REITs) represents a clear and growing appetite for real estate assets, mirroring broader positive economic trends.
Author: Leapfrog Property Group
