Do property markets hold the key to all of our futures?

While this may seem something of a broad statement, perhaps a little emotive, the fact remains that many aspects of everyday life revolve in some shape or form around the property market. This then begs the question do property markets really hold the key to all of our futures or are there other factors to take into consideration?

It will be interesting to hear feedback from readers to see what they think, their own experiences and whether indeed they feel that sometimes their future is out of their control.

Feelgood factor

There is no doubt that when economists talk of the feelgood factor the vast majority of times they are connected in some way shape or form to the property market. The fact is that a rise in property prices will not only bolster the personal finances of individuals but very often it can lead to more activity in the property market and potentially more disposable income. This then translates into greater economic activity, increased consumer spending which then filters down into businesses that invest for the future.

Quote from PropertyForum.com : “Are property markets nothing but a political tool?“

This investment in future business will likely lead to more job opportunities, putting more money in the pockets of individuals which will then often be reinvested into the property market and the circle begins again. Is this reality?

Negative equity

If you take a look at the real estate market it is all relative to your income, to the economy and to future forecasts. Those who acquired property 50 years ago would probably have paid a “pittance” in the eyes of consumers today but at the time the relative cost would likely have been very similar. This is why the issue of negative equity is one which cannot only drag down the property market but can quite easily drag down whole economies. How?

For many people the vast majority of their income will be spent in some shape or form on accommodation whether this is rent or mortgage payments. Therefore it makes perfect sense to assume that those trapped in negative equity will need to increase their mortgage payments which will reduce their disposable income. The reduction of disposable income could lead to a different lifestyle in the short to medium term and will obviously lead to less expenditure for consumers. This then impacts the economy, which impacts the job market which then impacts disposable income, and we have the makings of a “vicious” circle.

Where is your greatest wealth?

The chances are that those who own their own property will literally be living in their greatest asset going forward. This is why variations in the worldwide real estate market had such an impact in 2008 and why they will continue to have an impact going forward. The old saying that an investment in “bricks and mortar” is the safest going forward still holds value in the longer term but timing and any short-term variations can be brutal.

Conclusion

While there are many different aspects of everyday life which will impact our future prospects perhaps the greatest for many people is the real estate market. When you bear in mind how much we invest in our homes through mortgage payments, maintenance, rates, etc it is by far and away the most cash hungry element of our lives. Therefore, surely it makes sense to monitor local and worldwide property markets as a means of attempting to put our individual future prospects in focus?