Relationships between Real Estate Development and Economic Growth

Real estate development requires awareness as it has become a metaphor for economic growth. This is an ambiguous perception, however, because it portrays the real estate industry as the generator rather than the beneficiary of economic growth.  The exponential growth of high tech and internet-related industries has altered the landscape of the economy. As a result, the idea of a “new economy” has already been extensively implemented. We examine the role of real estate in this New Economy, and how the real estate industry might change in the future.

Real estate can be categorized into; Development real estate, Agriculture, Commerce and residential.The real estate industry, like any other sector, continues to evolve. In rural areas migration is considered a key driver of residence and trade buildings around the world. As a result, demand and supply differences occur. The situation is worsened by a malfunction on the supply side due to challenges arising from a lack of funding and loans, unflattering interestrates, low earnings by the population, construction costs building materials and land acquisition problems.

Creates employment opportunities.

Real estate development helps in creating employment, providing shelter to families promoting the distribution of income in an economy and lessening poverty. Real estate property is made up of land buildings, vacant lands and natural resources sitting on the land, flora and fauna. Real estate development entailspurchase, management,ownership rental land or sale of real estate properties for profit. Real estate development relative to other types of investment is illiquid, demanding in terms of capital, and highly dependent on cash flow.

Real estate development and economic growth

The real estate market plays akey role in the economy. The interaction of the real estate market and economic growth has given rise to important policies to emphasize the importance of the relationship.

The effect of real estate market development on economic growth has attracted interest for too long. This may be due to the role that housing plays in the State in providing one of the basic needs of its people; accommodation. Although this is an important field for a system of constant growth, especially in response to the ever-growing urban population arising from other things such as migration from rural to urban areas, its contribution, or lack thereof, to economic growth remains unclear.

The investment theory tries to explain the exchange of funds by investors. Where real estate offers better returns given its limited risk, then the investor will choose to change their investment to the sector thus contributing to its growth. Models of real estate development ignore the impact of natural resources including the land to determine the outflow of the economy.Various studies indicate that there is a direct relationship between real estate and economic growth. There is a relationship between the price of the property and consumption in several economies.Crises in the real estate market may have serious consequences for the economy. Studies have shown that the collapse of the real estate market is at the center of many financial crises.

Impact of economic growth on the real estate market.

Economic growth is an indicator that hallmarks the state of the economy, and it can affect the value of wealth in general.As the economy takes strides forward, national income improves, and the demand for real estate in the economy increases, which has the desired impact on the real estate market. Shocks to economic growth have had a positive impact on real estate in various countries.The outcome proved that the real estate market was affected by economic growth.Macroeconomic growth has had an impact on top-tier cities as the magnitude of the impact reduces in smaller cities.

The development of the real estate market leads to increased economic growth. However, with the budding nature of the real estate market, it has a lot of risks and unstable development. It is mandatory to forecast the real estate market to arrive at a development orientation and have necessary policies in place to manage the real estate market in a sustainable manner.

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