Real Estate Myths: There is no SATURATION, always EVERGREEN

Sujan Afi S

In a very general way, Real Estate market indicates the market which is involved in buying, selling or renting of land, buildings, houses and the like. The term further includes the permanent things present on the land, i.e., permanently attached with the land like buildings, trees, fences, water, and garden etc.

The personal things like vehicles, boats, jewellery, furniture, farm equipment, etc. are not permanently attached with land; thus, they don’t come under consideration. 

There are four types of real estate market such as residential, commercial, industrial, and land.

Though at present, the sector of Real Estate market is witnessed to be one of the most attractable sectors to the investors, but with the progress of time and development a question may arise. Will there be a point where the Real Estate market will get completely saturated?

Suppose there comes a point of time when everyone has a home, an office space, or any other property they may need. Therefore, could there be a point where there will be no need for further Real Estate development? 

Well, before answering the aforementioned questions we need to know some facts related to human behaviour and Real Estate market.

Think yourself to be a service person. There are parts of India where the government and private sectors are still urging people to stay at home. Thus, the concept of work from home is emerging significantly. In such a situation, you might feel disturbed and might not concentrate in your job while staying in a joint family.

Again, there might be some people who would like to have a separate house in this pandemic situation. Thus, several situations may arise when an individual might demand a separate living. Naturally, the need of houses and apartment arises.

It is to be noted that like any other market the RE market also works according to the basic laws of supply and demand. Now the demand for real estate depends on many factors like demographic characteristics of population, economic conditions, technological development, innovation, change of locational importance, transportation, change of tastes regarding real estate property, rate of deterioration, physical factor like earthquake and climate change, etc.

All these factors influence RE market even in a saturated situation. There are many demographic factors that influenced the demand of Real Estate market, like population size, growth rate, fertility rate, age-sex ratio, rate of migration, nuclear and joint family system, death rate, divorce rate, and marriage types and rate, etc.

These demographic factors are not static; they are bound to be very dynamic in nature. The dynamic nature of these demographic factors plays a significant role in creating demand for Real Estates even in the most saturated RE market. 

Beside the demographic characteristics the economic condition and government policies also play an important role in creating demand for real estates in saturated RE market. High rate of GDP, low rate of taxation, easy access of loan for real estates, government subsidies for real estate property, high employment rate, and low rate of interest for real estate loan etc. creates demand for RE market even in a saturated situation.

Technological development and innovation also create demands for any kind of market; RE market is no exception in this regard. Even if the RE market becomes saturated, a new kind of real estate can be developed through technological advancement and innovation. For example, changes can be brought in building material, building structure, its durability, etc. 

Location is another key factor in RE market. New buildings can be constructed in areas which were thought to be unreachable/undesirable. We can construct new transportation route, establish new economic hub, government policies etc to access the inaccessible.

Even if people have houses in the most prominent area of a city, they would always want a cozy little space at the outskirts of the city. So, no matter whether the market is saturated, there will always be a demand.

The rate of deterioration of real estate property has a significant contribution in creating a demand in the RE market throughout the year. Every real estate property has a durability. For instance, a building may have durability of 100 years or 200 years. This characteristic of real estate property always keeps a demand for RE market. Renovation or modification of existing real estate property is very common and related with the desires and demand of people regarding real estate.

The process of renovation or modification of existing real estate property goes on throughout the year largely depending on the change of taste of people regarding real estate property.  This creates a demand for RE market also in a saturated RE market. 

Relocation of jobs, relocation of house, retirement from jobs, etc. influence the rate of selling or buying or renting of real estate property, thus, influencing the demand of housing in RE market. Relocation of house may be due to a number of social factors, like security, clash with local customs, change in the site and situation of house, discomfort with neighbours, etc.

In many cases the government policies and rules also promote people or a commercial company to relocate. Therefore, relocation emerges as a determining factor to create demand for RE market and plays as a barrier to RE market for being saturated.  

Beside the above-mentioned factors, that have an influence in RE market, there are several physical factors that create demand for real estate property in a saturated RE market. For instance, places that are prone to earthquakes, floods, etc. have to repair their houses or might have to build an entirely new house.

These physical factors have the ability to break the saturated situation of RE market at any point of time by destroying the existing real estate properties. Thus, at the end it can be concluded that there will never arise a situation when the RE market will get completely saturated. There will always remain the need for further RE development.

I hope I have been able to demystify the myth regarding Real Estate market’s saturation level. Just like the desires of human beings can never be satiated, the RE market can never get totally saturated.

Nevertheless, there will always be ups and downs in the production and supply. But the word ‘saturation’ is too imperfect to use with RE market.

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