Top 3 Important Factors That Affect Real Estate Market Investments

In this article, we explain the top 3 factors that affect the real estate market investments. Surely, real estate investments account for a significant portion of any Muslim investor’s portfolio. The size, scale, high returns with lower risk, and many other advantages always make real estate investments more attractive compared to other investment options.

Is it halal to invest in real estates?

Real estate investing is one of the most popular investment options among Muslims. According to Shariah laws, a Muslim investor should not earn income from an interest-based mortgage. When it comes to commercial properties, investors must not lease them to any tenant that engages in any kind of non-Shariah-compliant commercial activity. If Muslim investors invest accordingly following Islamic laws avoiding riba, gharar, speculation and haram activities, real estates are good investment options.

It is important for any type of investor to know the factors that affect real estate prices and value.

10 factors driving real estate market:

1.     Demographics of the Country

2.    The Economy

3.    Government Policies 

4.    Employment Opportunities

5.    Trust in the Market

6.    External Investors

7.    Budget of the Country

8.    Interest Rates on Loans and Property

9. Supply and Demand

10. Technology 

Here is the explanation of the top 3 factors affecting real estate investment.


Demographics describe the composition of a population like a gender, age, income, and others. These data are essential because they can affect how we price real estate and what properties are in high demand.

Knowing who resides in a particular area is vital information to find your prospective buyers or renters. For instance: your prospective clients might be millennials or baby boomers. Suppose they are millennials, considering they are starting families and beginning to build their careers. In that case, you can expect that they want high-quality school districts and convenient apartments close to their workplace. They would indeed consider more about the overall quality of the neighborhood. Moreover, they use different methods in searching property compared to baby boomers. For example, about 62% of millennials purchased and rented their home online, while 46% of buyers over 50 did so.

Significant changes in the demographics of a country can have a considerable influence on real estate trends for several decades. As an investor, before deciding to invest in any place, you can easily follow trends by learning the demographics of a particular area. Knowing all demographic information that influences demand can help investors place desirable real estate investments.

The Economy

The relationship between the economy of the country and the real estate market is highly correlated. If you want to know about the situation of the economy in a country, you can measure it through economic indicators like the GDP, the prices of goods, employment data, etc. If the economic conditions are good, then the real estate market also operates well. 

Understanding economic phases can help you much to manage your real estate investments. For instance: if you are starting to invest, then the recovery phase of the economy is the most appropriate time to buy property, as prices can be relatively low now but potentially higher in the future. Thus, if you know that economy came to its peak, you also realize that it is the best time to sell your investment properties. Or, at that moment, you need to rearrange your real estate investments and invest in real estate that can provide a steady return even in the economic downwards. 

Economic cycles can have different effects on various types of real estate. For example, hotels are easily affected by economic downturns due to their short-term lease structure. However, office REITs that have long-term leases are not easily affected by economic changes. You should know your property’s sensitivity to economic cycles and invest accordingly.

Indeed, a stable economy is the core foundation of any real estate market, and investors also want to put their money into only healthy markets. 

Government Policies

Generous governmental policies play an essential role in the growth of the real estate industry. The government can make investing easier by offering lower taxes, subsidies, and deductions. By doing so, the government can attract more international investors for commercial or residential investments. If government policies are very strict, the investors may want to find other cost-effective investment options. Furthermore, understanding government policies help you to stay on the safe side, preventing you from falling for false trends. 

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