Real estate is perhaps the most volatile sector of investment. One season, the price of property might be shooting through the roof while the very next season, the demand for houses or land may be dwindling. But one cannot deny that if you invest in the real estate market, then the chances of getting a high return is guaranteed, either immediately or in the long run.
Effects of the value of a property
The valuation of the property depends on many aspects. In the same manner, there is an equal influence that the price will exert on the market. The characteristic of the real estate market will depend on the demand for land or homes. If the demand for real estate is high, then the agents can mark it at a higher price. The clients will pay the price without much deliberation.
Cost of raw materials
If the demand for homes is high, then the agents will charge a hiked fee. It will, in turn, influence the cost of the raw materials directly. As the demand for houses goes up, the companies supplying the mortar, lumber, and other materials will also go up. If the real estate demand decreases, the raw material suppliers will be forced to reduce the cost to accommodate the market and make a profit.
Labor becomes expensive as well
Apart from the raw materials, a better demand in the property market will affect the labor market as well. When the construction workers get the information that there is a heavy demand for skilled labors in the market, then they will charge a higher fee for their work. The agents will not worry much about the paying the hiked fee as they are sanguine that they will be able to sell the property at a higher price.
If the demand goes down, it will cause the labors to decrease their fee as well. In such cases, the construction companies will not be willing to pay high labor charges to keep their profit margin.