What Is Real Estate Industry Analysis?

A real estate industry analysis is simply a comprehensive study of the various factors and trends in the real estate industry that might have an impact on the real estate business.Such an analysis involves the study of real estate business environmental factors like the supply of new houses, the purchasing power of buyers, the intensity of the competition among those in the real estate, or the related business and the threats that face those in the business. Using these factors as a guide, it will be easier to have a detailed information regarding the real estate industry.

One of the important factors to consider during a real estate industry analysis is the availability or the supply of real estate, which will help determine the viability of the industry. In the case of real estate, this includes the rate at which features like land, apartments, houses and other related objects are available. More related objects include building materials that may be required to construct new houses and other forms of real estate. It also includes the labor that is used to build the houses in the form of contractors, bricklayers, electricians and different types of laborers. Included in the analysis of the supply is the ease with which those in the real estate business can obtain funds or finance for the purchase of real estate, which often requires the assistance of banks and other finance institutions in the form of mortgages.

The demand for real estate is also a factor to consider during a real estate industry analysis. This is due to the fact that the factors of demand and supply must be perfectly balanced for any type of sustained growth to occur in the real estate industry. A housing boom where the demand outstrips the supply and drives the prices of real estate ever upward is neither desirable nor sustainable. This is because the inevitable conclusion of such rabid consumption is a crash, which will lead to a steep decline in demand and a corresponding drop in the price of real estate. A steady rate of consumption that is at par with supply makes for a more credible scenario that can be maintained.

Another factor to consider as part of a real estate industry analysis is the ease with which a newcomer can get into the business. This considerations for this factor include aspects like the study of the industry to find out if there is any type of monopoly or cartel that controls the real estate market that would make it difficult for new entrants to establish themselves. It is also tied to the availability of funds with which to establish a presence in the industry and make the business a success.