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What is the relationship between property prices and the economy?

In this blog, we will delve into the relationship between property prices and the economy. We will discover how the market and the economy influence property market prices. This information can help you to better understand this concept and therefore make more informed decisions.

Relationship between property and the economy

Property prices are directly and indirectly related to the economy. A rising economy translates into higher property prices. This means that if there is a high demand, property prices go up, as everyone wants to enter the market. At the same time, a down economy means less demand and property prices are falling, as there is less investment in the market.

But how does the economy affect the real estate market? Let's look at 3 ways:

  1. One of these ways is through bank interest, as banks change the amount of capital they lend to individuals depending on the interest rate and monetary policy. This situation affects the amount of capital available to buy a house.

  2. A government's tax reform can have a significant effect on the housing market. Changes in tax rates, tax credits, tax deductions and other tax incentives can affect the supply and demand for property. For example, a reduction in the income tax rate can increase the purchasing power of buyers and thus the demand for property. This in turn can lead to an increase in property prices. On the other hand, an increase in income taxes can reduce the purchasing power of buyers, which can lead to a decrease in property prices.

  3. The unemployment rate makes it more difficult for people to save for a property, as well as to access the loans needed to buy real estate. For this reason, it is essential for investors in the property market to be aware of changes in the economy in order to make well thought out decisions about what types of properties to invest in.

As we have seen, the economy is a very important factor affecting property prices, so property investors need to be aware of the changes in order to make informed decisions. Being aware of the changes can secure your investment portfolio.


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