|
What is the Market?
In Melbourne it’s the AFL, in Canberra it’s the weather and in Brisbane its jobs. But according to the Real Estate Institute of NSW President, Mrs Cristine Castle, residential property is always a topic of conversation in Sydney and NSW whether you are buying, selling or renting.
“For some people watching the real estate market is a hobby, for others owning property is a passion, but for everyone the market is a necessity, which raises interesting questions about what is the market and how does it work?,” Mrs Castle said.
At its most basic the market fulfils everyone’s need for shelter, financial and emotional security, and their need to create a home. The better the market operates the better the availability of good housing and unit stock for purchase or for rent at every level of affordability and in every geographic location.
In a perfect market it is simply a matter of supply versus demand. But as we all know in life nothing is perfect. The availability of land, government taxation, transaction costs, employment opportunities, demographic changes, lifestyle features, the general economy and local issues have an enormous impact on the market, which are reflected in the prices we pay to own or rent.
Governments are responsible for most of these issues and should have a vested interest in the market working as well as it can because when the market fails it is taxpayers and governments that suffer. One example of market failure is the need for government to provide public housing.
But that still doesn’t explain what the market is. The market is the interaction between buyers and sellers and professional real estate agents make that interaction as smooth – or as ‘frictionless’ as possible.
“A real estate agents main role in life, and that of the Institute, is to make sure that the market works as well as possible. That genuine buyers continue to meet genuine sellers and that landlords and tenants meet each others needs and obligations,” Mrs Castle said.
“As for what the market is? – that’s simple. It is all about people and in particular it is about families.”
“It is the needs of people at different stages in life that drives the whole idea of supply and demand. People leaving home; people living with each other; people meeting a partner; starting a family; families growing up; children leaving home; and parents growing old.”
Of course this doesn’t describe the whole market. More people are living alone. The nuclear family is less predominant. Society is growing older and we are all moving around - to the cities, the beaches, and the suburbs. But in the whole the market is driven by families and their need for space.
Which is why first home buyers are so important, whether they are a couple who want to start a family or a group of people who believe buying is better than renting - first home buyers are where the market begins. They purchase lower value homes from mainly mum and dad investors both providing a demand for housing stock and reducing the demand on rental accommodation. As they move through life they continue to upsize and purchase more expensive property until eventually they start to down size.
In the meantime, many become investors themselves, providing houses and units for rent and purchase and increasing the supply of both. And so the cycle continues and its role is pivotal in providing accommodation for those who participate in the real estate market.
|