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Rental Market – Prices increasing due to high demand and low supply

In the world of economics, we have been taught the fundamental economic principles which is the law of supply and demand. It gives an insight into how the services or products available versus services or products wanted affect pricing.

In learning the basic law of supply of demand, we can get a better understanding of how prices can go up or down. The more supply and the same demand can cause prices to go down. The less supply and the same demand can cause the price to go up. If the supply remains the same and the demand is more, the prices can go up. If the supply remains the same and the demand lessens, the prices can go down.

It is important to have a better understanding of these laws because it applies to all products and services and one of the markets that get affected by these economic principles is the real estate and rental market.

There are a lot of factors that can cause housing or rental prices to go up or down and the law of supply and demand plays a huge role in this.

Some of the factors that can affect the supply in the housing or rental market are the production cost. If the prices to spend for building, designing, or renovating increases then it could cause the supply to decrease but a decrease in the cost of production could help drive a supply in the market.

On the other hand, the factors that can affect demand could be the personal choices and income of consumers. The more customers with the right amount of income to afford to buy or rent a property, the more demand in the market increases.

One of the results the great recession has caused in the housing or rental market is the influx of buyers of renters because due to the financial crisis, they saw opportunities for low-interest rates or lesser down payments. A lot of banks also started to offer a more flexible borrowing rate that made it easier for many consumers to become new homeowners or renters.

The global pandemic also played a major role in the high demand for the real estate market. As more employees are given the option to work from home, many families needed to move to have bigger spaces for work and some also opt to move to more rural places away from populated urban areas.

The bottom line is that any line of business depends on the laws of supply and demand. For anyone in the housing market, it is important that we understand these laws to prepare us for any possible outcome and at the same time have a more effective approach readily available to use to secure the business standing.

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