The real estate market, also known as the property market, is the market where the exchange of contracts for the sale, purchase, exchange, lease, and mortgage of real estate takes place. Real estate is actually property consisting of the actual buildings and land on it, and its accompanying natural resources like water, plants or metals; and its intangible assets like labour or inventories. There are different types of real estate market depending upon the jurisdiction in which the real estate market is functioning. These are:
The supply side of the real estate market is where buyers from all over the country and the world come to purchase homes, either for investment purposes or as a residential or vacation home. The supply is also affected by the level of inflation that the country is experiencing, and factors like a decline in the value of oil, declining exportable goods like coal and petroleum, and overall economic stability in the country, all of which can affect the demand for real estate. Ultimately, the supply is determined by the elasticity of demand, where the more the demand (for properties) exceeds the supply (to sell properties to buyers), the price of real estate increases.
The role of banks and other lending institutions is to provide credit, which is what drives the real estate investment market. In the past, real estate investment primarily consisted of banks providing mortgage loans to buyers to purchase their properties. However, since the 1980s there has been a major change in the composition of buyers in real estate investment.
At this point in time, the primary role of any lending institution is still to provide mortgage loans to buyers of real estate; however, they have also established relationships with investors to provide capital funds to them so that they can develop or expand their real estate investment portfolio. It is important for buyers and investors to understand how these relationships work in order to determine whether a particular bank is a good fit for them or not.