14‏/08‏/2023

Factors affecting demand and supply of real estate

The introduction:

The real estate sector occupies a relatively large place in policy concerns, in economic analyzes, and in the social visions of various societies. This status comes from the nature that characterizes this sector, as it is closely related to many economic sectors, in addition to the fact that the housing problem is represented in the gap between the demand for housing units and the supply of them, which leads to an increase in their prices in a way that makes it difficult for a large segment of citizens, especially Young people have access to adequate housing, so it is very important to shed light on the real estate wealth in Egypt in terms of its size, current status, uses, and extent of its connection to facilities. The total number of buildings in the Arab Republic of Egypt is about 20 million buildings, 80% of them are subject to individual ownership, the percentage of buildings connected to electricity is 96.3%, while the connection to drinking water is 90.4%, the percentage of buildings connected to sewage is only 40.3% of the buildings of the Republic, and the percentage of connection to the natural gas network is 13.4%.

First: the demand for real estate in Egypt

The total demand is the society's need for a number of housing for the purpose of use or investment. The effective demand is represented in the total number of units required by individuals who wish to buy and have the purchasing power.

Motives of demand (buying) for real estate

• Availability of housing and shelter as one of the necessities of life.

• Reserve for children to use real estate in the future.

• Achieving luxury, which is represented in summer resorts and Almshati.

• Individuals invest their savings in buying real estate to preserve the real value in order to avoid inflation and the decrease in the purchasing power of money.

• Speculation on real estate, as some individuals expect real estate prices and their market value to rise in the future, resulting in high profits and capital gains when sold.

• Source of income through leasing.

Factors Affecting Demand:

- The average per capita income

One of the most influencing variables in the demand for housing, most of the demand for housing can be determined through the income of individuals (the higher the income, the greater the demand for housing, then the demand stabilizes with the increase in income, as a result of approaching saturation as housing is a slow-consuming commodity).

- The number of families

It is an important variable that contributes to determining the levels of demand for housing. Any change in the number of families leads to a change in the demand for housing units (given that the number of Egyptian families is constantly increasing, it is expected that the demand for housing units will increase).

- Overpopulation

Where the population increase is represented in the large increase in the rate of population numbers in a region, so that the number of newborns increases at a time when the number of deaths decreases significantly, and this population increase is in light of the stability of the available resources, which leads to an increase in the demand for housing.

-Average family size.

The size of the family of diverse genders between females and males prompts the head of the family to think seriously to search for a new residence as the children grow older, as males and females get their share of independence in separate rooms.

-The number of marriages

Egypt witnessed a marriage rate that reached 8.8% of the total population, which consequently leads to an increase in the demand for housing. The greater the number of marriages, the greater the demand for housing.

- workforce

 The size of the labor force in Egypt is estimated at 30,223,374 people. The greater the size of the labor force, the greater the demand for housing.

-Foreigners in Egypt

The increase in the number of foreigners in Egypt leads to an increase in the demand for housing, as there are between 5 and 6 million foreigners living in Egypt, and these are not refugees and do not live in camps.

Secondly, the housing supply:

The supply is represented in the number of residential units implemented by the government, private, public and business sectors, and in order for the real estate sector to succeed, it must provide real offers that suit the needs of customers, in terms of location, space, quality of finishing, and prices as a first priority as it determines consumer choices.

factors affecting supply

- Inflation and rising prices of building materials and labor

Where there is an inverse relationship between the supply of housing units and the prices of building materials.

-Legal and regulatory factors

Such as the laws regulating land use and its area in a way that is schematically in line with the housing needs of the city, as well as the laws related to building determinants such as building density, coverage ratio, and building height, and the laws regulating investment in the residential sector, which include facilities provided to the private sector to encourage it to invest in the residential sector.

-Land prices

Where there is an inverse relationship between the supply of housing units and land prices. The higher the land prices, the lower the supply of housing units.

-Giving the state priority to the real estate sector

Giving the state priority in developing the real estate sector and establishing new cities helped increase supply. We see this currently in real estate projects, such as the New Urban Communities Authority and Social Housing projects, and a future that appears clearly in the recommendations of the recent economic conference, whereby creating a new system for real estate financing through the balance of supply and demand for housing, by stimulating the participation of the private sector in providing housing units for different income groups and Work on activating the mechanisms of real estate financing and real estate registration of units, especially to control the relationship between individuals and the real estate developer, and that this be done electronically.

- Urban factors (availability of public services and utilities)

As it is not possible to build any residential area and increase the supply without providing these services represented in the infrastructure.

-Optimistic investor expectations about demand.

Where there is a positive relationship between investors' optimistic expectations about demand and supply.

Claro Clock provides good consultations and a detailed explanation of each region in terms of stage, urbanization rate, population occupancy, and available services for easy decision-making, in what is considered to be of benefit and interest to the investor and the buyer.