How supply & demand determines real estate prices?


It’s obvious for the laws of supply and demand to inflict real estate costs to a great extent. When availability of real estate units is less against a significant high demand, prices soar sky-high whereas the market turns in favour of seller. On the contrary, the increase in number of property units with less demand drops the price.

In real estate industry, balancing supply and demand is quite challenging whereas making available more units takes time, demands considerable work and effort. Sometimes, achieving all of this altogether isn’t possible. And even if it’s in fact achievable, increasing supply to meet consumer demand on time would be impossible.

Understanding the basic economic principle helps consumers to determine the best time to buy or sell real estate in Sharjah which is quite handy for agents and brokers associated with the industry.

Land parcels are restricted

You just can’t fill up property supply scarcity by producing more units out of the land since it’s a finite supply and not a manufactured product. Remember, you may create units like townhouses, condominiums and so on within a given space however, the land remains unique and can’t be a replacement for a short supply.

Property is immovable

If there’s a shortage of land for development of home in the given area, it’s obvious that additional land can’t simply move in or introduced as a supplement. Property always remains where it is and there’s always a local commodity which is influenced by native conditions.

Excess supply means reduced costs

When there’s excess or over supply of homes or land in any given area, a drop in price is usually expected. You simply can’t move this excess to any other area just to stabilise the prices.

Less supply raises the price

Property prices are likely to rise when there’s a significant scarcity of land or homes in a designated area, keeping demand at its most. Even if land is indeed available which can be utilised, the total time to produce finished good that is constructed homes is insufficient to fulfil the demand would either raise the price or keep it constant.

Real estate is a local industry

Real estate market is influenced by many different factors such as trends in national home prices, interest rates, introduction of new housing, social, political and economic condition so on. Both, property investors can take advantage keeping updated with all the latest information however, it must be kept in mind that real estate is a highly localised business which is influenced mostly by the local conditions. Conditions in other countries are less likely to affect a local property industry.

You should pay close attention to the factors influencing the local market especially if you’re a broker, agent or somehow associated to the industry. If yours is a business with various employment opportunities and workers are willing to relocate in the area, carefully eye the local businesses and also measure any up and downsizing trends that directly affect the business.


Supply and demand in the real estate business will always remain a local debate however, it’s better to keep a close look at the trends in other regions so as to keep yours competitive.



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