Is Real-estate Potential Overlooked in The Economy?
Naiga Onyango
Over the world, the real estate sector is one of the most lucrative ventures of several economies and one of the indicators of economic growth in a society. It mirrors the economic viability and sustainability of an economy and its poverty level. The level of infrastructure in an economy is largely contributed by real estate investments.
Economic growth
In most developing economies, the role of real estate is overlooked thus often, its potential and contribution to economic status are missed. However, in the developed world, this is the domain with more weight than other sectors. With better technology, infrastructural capacity has grown tremendously yet another reason developed economies have increasing GDP in comparison to underdeveloped economies. High volumes in the real estate market such as high demand in the housing sector, unutilized land, expansion of real estate Trusts among others give a wider view of the unseen real estate impacts.
The sector offers a great potential source of growth for our economies. Until now, the understanding of its composition and growth has been somewhat limited and even its use in the national accounts is very limited. According to the Reserve Bank of South Africa’s 2013 statistics, real estate and associated services contributed about 22% of GDP in that country. Locally, the absence of definitive data makes it difficult to come up with the exact contributions.
Employment source
Real estate impacts directly individuals' daily livelihood besides infrastructure development. It is labor-intensive thus provides employment in construction sectors and real estate agencies. Unemployment is the major factor that brings down the economy, therefore real estate suffers a setback. For instance, the drop in housing construction was a big contribution to the recession's high unemployment rate in the US in the 2008 recession.
Wealth creation
Overtime now it is evident that real estate investment is the leading source of wealth. Most of the world's richest people have investments in real estate. The underlying commodities or properties in real estate have low correlation and their values always increase with inflation. This gives them a unique feature with low risk and higher returns.
Source of revenue
Governments generate income from the real estate sector through taxes which they use in growing other sectors of their economies.
With the continually growing population, definitely, the demand for real estate services, products and construction activities remain elevated over time.
