Developing a market analysis in the real estate sector requires a deep and detailed research into the market to gather potential information about our future prospects like our properties or clients.
In Real Estate, it is very important to focus on the area in which the study will be carried out. The area must be local and within our proximity. This is because the place where our real estate project, either a house or an apartment, is built, has certain characteristics of its own.
A market study gives us vital information and data about our future clients and properties. It can also provide a detailed overview of our competition and how it operates in the area.
For this, we can use one of the most trusted and reliable real estate investment tools – Privy.
We also have to study our potential client base thoroughly by researching what they like in an ideal home, what hobbies most of them have, and what they want to find in their new neighborhood. This helps us improve our property and define our sales strategy better.
The relevance of a real estate market study
A market study is a tool that allows us to carry out a detailed analysis of supply and demand for a specific good or service. The study also provides a measurement of what the risks and opportunities are with each investment.
Speaking specifically of the real estate sector, a market study provides us with in-depth and detailed information about our future client base for the new development. They also provide the characteristics that differentiate our property from the rest of the competitors, and an estimate of the costs we can incur in the future.
Real estate market studies
The main objective of the real estate market analysis is to present the necessary information for developers or investors so that they make the right decisions. It also helps them learn about the characteristics of an area, and understand current market trends.
Developing a real estate project represents a substantial investment. Therefore, it is necessary to avoid risks by supporting research that analyzes:
- The location of the land/project.
- Consumer behavior
- The competition
- The market trend
- Financial studies
Financial studies are essential for the development of any real estate project. Thanks to this type of analysis, it is possible to determine profitability by measuring and studying income. Not only that, but it also helps in determining costs, discounted flows, as well as the behavior of profitability under different scenarios.
This type of study comprises of :
- The analysis of the behavior of the primary financial motives in the project
- Calculation of the Internal Rate of Return (IRR), the Net Present Value (NPV), the capitalization rate (CAP rate), among others
- Financial models made by specialists, using assumptions such as capital contributions or debt from banks, investment funds or new partners
- Procedure for the sale of real estate in the event of financial insolvency
- Discount of flows in 10-20 years using three different scenarios
- Estimation of the final value of the property
- Establishment of limits to ministers by the size of work
- Establishment of credit and collateral guarantees
How to do a real estate market analysis
To start doing a market study, we must begin by defining our objective. What do we want to achieve with this analysis, and why?
One of the first steps in the analysis is gathering information. It is necessary to know what type of information is available in our sector to have a viable idea of our area of impact or the area of our work. For this, we can go to public institutions, private companies, organizations and entities that provide us with all the information we will need.
It is also essential to collect data from our audience, i.e. the group of people we intend to reach. As we mentioned above, we need to know their tastes in properties, interests, general lifestyle, and whether they are looking to buy an apartment or house or if they are looking to rent it.
If our objective is to sell, it is essential that we have a rough idea about the average price our clients will pay for the house. Equally important factors to know about our clients is if they want their house in a middle or upper-class area and what their purchasing power is.
We also have to understand the competition we’ll be facing. We need to research what their influence is, how they act and what type of advertising they use. We need to go as far as possible to learn their marketing strategy – without copying it of course. The more we know what their marketing strategy is and how they execute it, the better it is for us.
At first glance, doing a market analysis seems easy. However, in truth, if we do not have sufficient knowledge and experience for analysis, it is better to leave it in the hands of the experts in the sector. They know exactly what we, as real estate investors, are looking for and how to achieve it with precision.
Results to be obtained from the market analysis
As we have already said above, doing a market study is a complicated job. However, the benefits and the amount of information we can obtain from it is unparalleled. If utilized properly, it can undoubtedly be the navigation chart that will lead us to our ideal real estate projects.
Within the analysis results, we must find:
- The study that should provide us with detailed information about our impact zone
- Information on the demand that exists in the area
- Market data such as prices per square meter, etc
- Socio-economic data of our target audience
The above are some of the results that a well-done market study should yield. Ultimately, the analysis should give us the information and the necessary tools to implement our marketing strategy – a marketing strategy that must be based on professional research.
This data will also help us study the demand that our sector has in that area that we will work with in the near future.
So if you want your real estate project to be successful, do not hesitate to go to professionals in the sector who will be in charge of advising you and providing the necessary services to carry out a successful market analysis.