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Real Estate Effects on Economic Growth

The recession of the last decade is a thing of the past. Although it was primarily triggered by what the market calls a real estate bubble, the sector has revived like a phoenix.

In all fairness, the real estate crisis was confined largely to the United States. The recessionary impact on Asian economies was more of a ripple effect, mainly due to a slump in exports and services for countries like Singapore.

The real estate market did peak in 2007 and since then it has been largely steady with modest growth rates over the years. The market peaked again in 2017 with more than forty billion dollars in total investment sales.

The Singaporean economy is continuing to grow and the government remains buoyant about every major industry, including the real estate sector.

The real estate sector and economic growth are correlated. While there may be concerns about rising prices and vacant homes in Singapore, the overall scenario remains promising and that is partly the reason why most investors are confident about the city state.

The positive momentum is poised to continue. Bearing such developments in mind, let us explore the effects of real estate on economic growth.

Direct impact felt by foreign

Investment in real estate has a direct impact on the gross domestic product. Unlike larger economies like China, Japan and India, Singapore does not have staggering agricultural produce or industrial output.

Most industries are flourishing in Singapore but their sizes cannot be compared with much larger and the most populous nations like China and India. Financial services, trading & commerce, shipping and aviation, technology and tourism aside, Singapore has always been a prime real estate market for domestic and foreign investments.

Very rich Chinese people

Recently, the high net worth individuals or the ultra rich of China have expressed their intent to invest in Singapore real estate, shipping their perennial favorite Hong Kong.

Such investments have a direct impact on economic growth, it helps local construction companies and affects the market in many other ways.

Real estate directly reflects the economy

Growth in real estate also reflects economic well being in a country. People are likely to invest in residential properties when there is ample employment, substantial income, money to spare and there is considerable confidence in the economy.

Not many people will buy homes or even upgrade their rental properties if they are not feeling secured about their job and have enough cash to spare. A buoyant and stable economy will always spur growth in real estate.

Hence, just as economic growth creates a stir in the real estate sector, the vice versa is also true.

Environment to scale exciting operations

Real estate is also a strong indicator of how companies, investors and traders are feeling about the economy. More companies would set up their bases and branch out across the country if they are confident of the prospects.

This propels a growth in commercial real estate. The same rationale is applicable for industrial real estate. If confidence is low and there is no positive momentum, the sector will witness a slowdown.

In a nutshell, if there is increasing interest in properties and similar assets, then an economy is in a sound state and growing.

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