Supply and demand might just be the most important factors in our economy. How much of something exists, and how badly people want it, are the defining aspects of how that market works. From an investor’s perspective, the best bets are ones where demand outstrips supply. With these kinds of investments, we find success because there will always be people willing to exchange money for what we have.
That brings us to real estate. The fact is, everyone needs a place to live. Housing is a necessity. So, with that in mind, it just makes sense that real estate would constantly be in high demand. Everyone needs shelter, so everyone is in the market for a place to call home, whether it is to purchase a home or rent a home. This means that when a person invests in residential properties, there isn't a shortage of people to rent it to or even sell it to.
There are a few reasons that demand is greater than supply in the real estate market. One is that demand for housing increases with the population, and the population isn’t getting any smaller. The population will also expand as the government ramps up immigration in the coming years. But just because the need for housing has increased, doesn’t mean the supply has. There is a housing shortage in most cities with no concrete plans to address the issue. Constructing new rental units costs money, and it’s a cost that isn't immediately made up for. Profiting from a newly built building takes time.
Meanwhile, many existing apartment buildings have, in the past few decades, been converted into condos and sold to owners. This leads to even fewer options for renters. However, people still need places to live! So, when you invest in a piece of the real estate pie, you’ve invested in a market that works in your favour while providing safe beautiful homes to people who need a place to live.
A market where demand outstrips supply is one that works for investors. Real estate can provide that kind of environment. It’s something everyone needs, and as long as people need shelter, it’s going to stay that way. This is one of the many reasons real estate can be such a great investment.
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