Key Investment Tools: Supply Rate

15th October, 2015
  • Supply and demand is a classic consideration in real estate. However, there are unique things to be taken into account when considering the supply rate of the real estate market.

    Real estate is not an easily manufactured commodity. Nor is it possible to simply produce new housing units instantly to meet an increase in demand when it occurs. Likewise, it is simply not possible to produce more land or more space as needed to meet an increase in demand for a specific area.

    There are some things regarding the supply of real estate that are universally true, and that are easily understood from a basic economics standpoint. An oversupply of housing in a given area typically means lower prices. Likewise, an undersupply of housing in a given area typically leads to price increases for that housing.

    This rule can also be applied to specific areas of real estate, such as types of housing. If there is an abundance of certain types of housing units, such as flats, but residential properties are in short supply, then the prices of flats can be expected to be much lower than that of residential properties, even if they are in the same area.

    However, on the whole, it is important to understand the location-based nature of real estate when it comes to considering the supply rate of real estate in a given area. As certain neighbourhoods increase or decrease in popularity and residency in that area experiences a corresponding increase or decrease, the supply rate can be expected to shift accordingly.

    Paying attention to these shifts can better enable an investor to predict pricing fluctuations in the housing market of a given area, especially once they can take note of trends in residency within certain neighbourhoods.


    by: Prime Asset Investments

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