Economic Factors That Effect Real Estate.docx

1.1 Economic Factors That Effect Real Estate

1.1.1 Demand and Supply Basically demand can be referred as the amount of a product that a household would buy, meanwhile supply is the amount of a particular product that a firm would be willing and able to offer for consumer to buy, in that case when the law of demand is implied therefore when the price goes down the quantity is increasing. In real estate both demand and supply are very essential because it will determine the price of a property therefore you may conclude that when there is an oversupply property the price of the property will decrease meanwhile if there’s only limited property the price will increase. Those two determinant are caused by the properties of real estate which is the location is fixed. 1.1.2 Disposable income Disposable income is the money a person has left over after all taxes have been paid. Disposable income is an important terminology because it is the key indicator used to measure the health of the economy of a certain people. Disposable income most often used by developer to determine how much household is spending and saving which made them understand on the ability of a consumer to make purchases, pay for living expanses and save for the future 1.1.3 Mortgage Rate Mortgage rate is the amount of rate interest that charged based on a mortgage, mortgage rate may referred as interest rate. Interest rate will determine type of investment, basically the investor will invest if the rate of profit is higher than the interest rate. Interest rate are determine by two factor which are the internal and external factor, internal factor would be referred as the national income and inflation meanwhile the external factor would be referred as foreign exchange rate. 1.1.4 Capital Gain Capital gain is the increase in value of a capital asset or an investment upon sale or for instance you have a property that you bought for RM1000 and once you sold it with RM1500 the difference between them is capital gain therefore the capital gain is RM 500 which in every country there are certain regulation that implied the capital gain tax so basically government will charged a tax imposed on the profit of a property that you sold