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This article includes basic information about demand and supply forces on the real estate market and also about main market players, trends and issues and principal rules crucial for each property manager in their work.  


Characteristics of real estate markets results from the real estate features and property law, when they could have direct or indirect influence on the markets shape and operations. Among all real estate features, most important are:  

  • immobility, which causes that real estate transactions involve not buying/selling/renting the actual real estate (physically) but right to it.  
  • as a real estate owners and users we deal with many kinds of different rights and law regulations. That means for the real estate owner right to sell/ rent not only ownership rights but also other rights.  

Real estate can not be produced in one place, where manufacturing costs are low and then be sold on the market which ensures highest possible return. Yet it is possible to enhance real estate utility value for potential clients by investment, extensive repair, and modernization and so on. Real estate major 

repairs and renovation can be so fundamental, that refurbished property could find totally different end users and value then before.  

Articles concerning real estate law gathered in civil code indicate that buildings, lands parcels and so on are properties and therefore have a value and can be transferable like any other good.  

In other words, real estate characteristics and property law cause that in many cases real estate market differs from other markets, but in fundamental matters concerning market mechanics operates very similar.  This means that real estate market is a place of information and goods exchange. Before ownership or other rights will be transferred to a new owner usually real estate has to be presented on the market to be sold, parties involved in the transaction negotiate with each other, when they reach the agreement transaction is being concluded.   Despite of real estate characteristics, among which most important is immobility, mechanisms like forces of supply and demand operate on the real estate market like on any other market, difference is that often characteristic features of real estate can disrupt mechanisms. Generally supply and demand forces on the real estate market solve for the equilibrium price.   Among real estate characteristics which have direct or indirect impact on shape of real estate market we should focus on immobility which causes invariability of geographical location of land and property. Once built real estate usually stays a part of a landscape for many years.   Economic and technological circumstances have to change significantly so that existing object could be replaced with new one. But even then location remains characteristic feature of property.  

Real estate characteristics directly influencing real estate market are there features which cause different than on the other markets sell/buy/lese solutions: 

  • Real estate market is local (globalization is an issue concerning capital flow and financial solutions on the property market, but not estate in particular). 
  • Decisions made on real estate market have a significant meaning, while price is relatively high and property’s life cycle is long. 
  • uniqueness/ heterogeneity of each real estate without any doubt affects decisions (which are mostly subjective) of market participants. 

 Among indirect effects of real estate characteristics are:  

  • unique financial solutions on the real estate market, 
  • investment and development processes which differ from solutions adapted on other markets, 
  • consequences for the owners/ users and investors of indestructibility and fixity. 

Real estate finance– practically every real estate has a high price in comparison to other consumer good. To become an owner most of the buyers incur a debt from a bank or use other sources to finance their purchase. Also gaining other right to the property, as well as real estate management and investment requires additional resources from the financial sector. It is a common practice on the real estate market that almost all investors use credits to proceed with the investment. For many years bank and other financial institutions prepare products customized for individual and corporate investors on the real estate market. Today’s financial products and institutions are connected with the real estate market. Many of them exist and operate thanks to and because of real estate market. Financial institutions are generally active participants and have an influence on real estate supply. Real estate brokers/ sellers often compete for the same clients as well as financial institution to. For real estate investors financial products and options are equally important as property itself. Sometimes products offer more incentives than actual purchase of a real estate. Real estate market could not be decreased to transactions concerning property rights, role of financial instruments can not be overestimated, while most of the real estate transactions would not be possible without them. 

Second indirect effect caused by real estate characteristics is strong connection of investment process with the real estate market.  

Real estate supply presents only percentage of whole real estate stock, usually properties not presented on the market have owners and users. High sell and rent price of real estate per square meter attracts investors, new investments contribute to the growth of the real estate supply. 

From the macroeconomics perspective investment is a process of transformation of cash flow into economic goods as a result of investment process (new real estate is developed, additional space is available).    Real estate investments contribute to the GDP growth; also have influence on utility and value of already existing properties and supply level on the market.   When market looks attractive for investors- unit prices are high and there is a possibility of demand growth, often enterprises as well as individuals decide to pump money into local real estate market. Once the real estate development process starts it is predictable when it will be finished and new supply will be available on the market. Projections concerning future supply level have an influence on the price level of current real estate stock. Often real estate deals like sell or rent of space take place before investment process is being completed.     Also real estate marketing is a process which usually starts when decision about is being made. Residential properties are being often sold shortly after the construction permit is issued and it is possible to present approved property plan.  In case of hospitality business before hotel starts to operate rooms are available for booking 6 months before opening, convention centers are available for booking 2 years ahead (or even earlier) before official  opening. It is possible to sell a property at any stage of the  investment process, owner can change couple of times before process is finished, and it only depends on price and return rates. It means that during investment process not only real estate but also real estate market becomes part of the process. Both investment and real estate market influence each other even before real estate development is finished. Even when investor and end user is the same person, investment has an influence on the market. Owner of the apartment/ house buying a new one leaves old one, often sales or rents it, also a company building a headquarter already occupies a space, which probably will be available on the market after construction of a new one will be finished.    

No matter what kind of property is considered- real estate investment is not a process which takes place beyond the market- it is a part of market. 

Third indirect effect of real estate characteristics are consequences for the owners/ users and investors of indestructibility and fixity. 

Life cycle of property is usually longer that an average human life. Many years before J. Goryński stressed that it is an effect of technology and materials used during a real estate development. He also addressed real estate longevity as an issue which causes certain consequences. “They result from changes of preferences and users needs, on the other hand- from the need to maintenance the property in accordance to the safety regulations until real estate is occupied”.  After over 40 years these assumptions are still up-to date. More often properties are not only considered as places to live in and work, but also as tools to make a profit. So that possibilities to extend a life cycle of real estate- technical and aesthetic become priorities for owners and property managers. Real estate management is lately an important issue on the market, it includes: aims, methods, plans implementation and so on. It could be compared to a strategic plan which needs to be constantly updated. Real estate management also includes decisions about investments and renovations, financial options and possibilities to keep or sell a property.   Even when in the certain phase of time property will have couple of different owners, all of them will face similar management issues to use and exploit property according to their needs and plans.  

In other words- real estate characteristics (like longevity) and market mechanisms and objectives (like profit making despite of building depreciation costs) require preparation of management and development plans.  

Real estate management has to be connected with life cycle of property; management process concerning a certain property also concerns a real estate market and affects both. Also market and properties localized on it are connected and have an indisputable influence on each other.  


An average real estate market participant, for example a person buying an apartment, usually identifies real estate market with his own activities on this market. From the market’s point of view buying/selling residences is an important part of all transactions. Diagram below shows a model of real estate purchase. 

Istanbul-real-estate-for-sale-for-rent-Purchase -property

Purchase of  the property. Source: Own elaboration  

Model of real estate purchase, most often a residential estate, presents transfer of any property ownership laws. It could also include following real estate market participants: 

  • real estate surveyor, if transaction requires data about property appraisal 
  • real estate restorer, if for example listed building is being sold and investor needs information about property in order to use it within the law. 
  • other parties, if participants of transaction will decide so.  
  • Also it is worth to mention that if transaction takes place on the social housing market, it involves subsides from the public budget. 

Summing up influence of specific real estate attributes and laws on real estate market coordination and operation it should be stressed up that this market is definitely more complex than it seems at first glance. It includes transactions like:

  • real estate brokerage, which include sell of ownership and other property rights
  • real estate investment taking place during different periods of real estate life cycle leading to utility and value growth  
  • real estate management, which aim is to keep the property in the same or improved condition- maintenance, redevelopment, build-up and so on.  
  • other services possible to be used on the market to increase profits from the real estate.
  •  also financial services or government subsidies. 

Focusing on the real estate transactions market could be divided into submarket of: 

  • property brokerage, regardless what kind of property is being sold, who is the buyer/ seller. 
  • market of financial services and products- loan, insurance and leasing products concerning real estate in any phase of the life cycle. These financial products and services could have not only commercial character but also could be initiated by the central and local government. It also includes such ideas like mortgage backed securities. 
  • real estate value increase by investments, which lead to growth and modernization of real estate stock.  
  • other services, especially brokerage and real estate management. 
  • exchange of other property right 

 Above-mentioned division leads to the definition of real estate market as follows: 

1) Supply part of the real estate market, which could be divided into: 

a) Total number of properties offered to be sold or rented, which includes:

  • real estate supply e.g. transfers of real estate ownership rights to the owner. 
  • supply of space: mostly office, warehouse and living space which could be rented- usufruct rights.  Including already developed properties, as well as under construction and renovation and so on.  
  • Potential supply 

b) Capital investments in the real estate, which aim at utility value increase  that might lead to increase of property value and mostly to property space increase.

c) Financial products related and designed to increase potential demand and supply on the real estate market. 

d) Real estate services market, first of all real estate management, brokerage, investment, property interior and exterior design, cleaning etc. 

2) Demand side of the market is represented by: 

a) Demand for real estate, both in form of:

  •   purchase of ownership law 
  •   purchase of right for perpetual lease and other property laws.

b) Demand for financial instruments enabling purchase of ownership rights to the property.

c) Demand for services related with growth of real estate value.  

d) Demand for other services provided by broker, notary, and geodesist.

3) Real estate market operations, by which we understand law procedures and economic relations between different market segments in relation to market rules and real estate characteristics. 

Background for such a definition of the real estate market are needs, which combined with a purchasing abilities create a demand side of the market. 

Above presented definition of the real estate market is rather a “functional”. It is based on demand and supply function and it tends to define all participants as entities exposed to market mechanism- it includes majority of participants and operations taking place on the real estate market. Presented definition is only a proposal and can not be treated as the only one possible.   

It is worth to emphasize that market participants on the demand and supply side are private persons and legal entities, which make decisions about their market activities based on own needs, abilities and expectations for growth/ expansion, as well as current and expected market position, economic and law system, economic situation and other factors. It seems obvious that factors which have positive or negative influence on market players also influence market itself and determine its progress. To briefly sum up real estate market may be presented in the form below.  


Diagram of the real estate market 


Real estate market is a complex and complicated structure, which consists of number of many and related with each other segments. Specialists form the real estate filed treat this market as mostly local. It means instead of talking about one global real estate market deal with many local and characteristic for each region/ country markets. 

There are many differences between real estate markets in the developed countries like the USA or EU countries and local markets in countries like Brazil, Russia, India or China called together as BRIC countries. Real estate market segmentation simply depends on adopted criteria. Following systematic approach one can distinguish following sub- segments of the market: 

  • Real estate brokerage
  • Real estate investments 
  • Real estate management  
  • Real estate financing 

Real estate brokerage is supposed to bring together parties (like buyer and seller or landlord and tenant) in the transaction on the real estate market. The broker (who holds a licenses) mostly acts as an agent on the behalf of his client or clients in negotiating the price  

Another important and essential for the real estate market operations is investment segment. Usually real estate investment is money used to develop new or purchase a property for the sole purpose of holding or renting/ leasing it for income.  Also major overhaul, which aim is to improve standards and usefulness of the property is considered as an investment  

Real estate/ property management market became a very important part of the real estate market lately. Often properties owners (especially of office buildings and large apartment’s complexes, as well as shopping malls) do not have time and expertise to manage their buildings on the daily basis. Usually they hire a licensed specialist to manage the property on their behalf and to 

maximize the income from rent, lease and others, and to maintain the values of property, as well as to find tenants. 

Last but not least segment is real estate finance. A purpose for the finance sector is to provide founds (usually commercial bank loans, also savings associations, real estate investment trusts) for the development or purchase of a property. Significant and unique for real estate finance is a fact that most often properties involved in that kind of process are pledged as collaterals for the loans, usually through a mortgage or trust deed. 

Real estate market could be divided according to property’s classes into: 

  • Residential real estate market, which includes family houses units,  apartments, mobile homes, as well as dwellings used for holiday homes. 
  • Commercial real estate market includes shopping malls, office  buildings, cinemas, and so on. 
  • Industrial real estate market consists of warehouses, factories, and so on. 
  • Agricultural real estate market includes among others farms, ranches  and timberlands. 
  • Special purpose properties market. It consists of churches, government  buildings, schools. 

Above presented segmentations are not only one and valid. Real estate specialists and institutions monitoring the market tend to build and use their own and specific segmentations. Urban Land Institute often presents property market as: 

  • Retail 
  • Hotels 
  • Mixed- Use Properties 
  • Office
  • Industrial 
  • Residential 


Participants of real estate market are usually licensed specialists who represent one of the submarkets but actually being active and influencing most of the aspects connected with properties. Group of the participants is very diverse and specialized.  

Demand and supply play a very important role important role and influence decisions made by participants. Most of them could be divided into following groups: 

  • representing demand side  
  • representing supply side  group of participants responsible for providing services – brokers, appraisers, property managers.  
  •  others 

First group participants could be local or even international players who represent demand side of the market. Individuals, small companies or even international corporations seeking for a place to rent or buy are creating demand and have a large influence on the market.  

Among group representing supply side we distinguished: 

  • Developers, who seek for the possible high return with a minimum commitment of money and time usually by developing properties which will be sold or rented, 
  • Firms as well as individuals investing in developments for their own use, which usually sell or rent occupied space. 
  • Property owners who put their sale offer on the market. 
  • Property owners/ managers who put a rent offer on the market, also those who extend space of existing properties.    

Additionally to the supply group belong participants who bear personal and professional responsibility for their activities on the real estate market, such as: brokers, appraisers, architects, and attorneys. 

During last couple of decades parties involved in financial products distribution became very important players. For instance commercial banks, investment trusts, saving associations offering loans, mortgages and many other products, which are funds for the development and purchase of the estate.  

Also architects, planners, landscape architects or contractors involved in space extensions, overhauls have an influence on size of the supply stock.  

Participants responsible for providing services are legal entities like courts responsible for land and mortgage register (Land and Mortgage Registers Department), Internal Revenue offices responsible for collecting property taxes.   

Also building inspectors who issue building permits for construction of new properties or altering existing ones, as well as certificates of occupancy required before property may be occupied. Group classified as other participants represent those who take part in “nonmarket transaction”, like inheritance. Basically by signing documents they can transfer property ownership rights on the third party. 

It is often a case that real estate market participants can play various roles and be engaged in different project in one time, as well single project may require engagement of many entities at ones. For example one development process involves architect, developer, engineer, construction workers, and often commercial bank lending money.   

Presented in this article market participants division is not only one binding, but it is a frame which groups entities involved in activities on each real estate submarket.  


Real estate market characteristics are directly connected/ result from the characteristics and rights to each property. As any other market good real estate can be sold and bought. By investment and proper management worth of each 

property may increase. Real estate market is simply a place where mentioned processes take place and engage various participants at once. Price, demand and supply play a significant role as on any other known market.  

Most significant feature of property which has a significant influence on the market is immobility, which means that geographical location of the property stays constant. Furthermore heterogeneity (there are no two exactly the same properties), fixity or long durability of real estate cause that this market is specific and different form any other markets of goods.  

Real estate market is considered as local. Property can not be “produced” in one place and sold somewhere else in order to gain higher profit due to real estate immobility. Developers can not move/ transport property. Once located building usually becomes a part of the local landscape for a long time. Even among one city real estate market may be divided into couple of smaller and characteristic local markets.  

Real estate market does not react immediately to changes of demand and supply level; it is less flexible to exterior factor than for example stock exchange. It is basically a case of fixed amount of land properties available for new developments, high cost of investment process, or long life cycle of an average property.  

It is worth to mention that government controls and appears as one of the participants on the real estate market. While properties play a significant role in everyone’s life being a shelter, place to relax, live and work local and central governments needs to make sure that by forcing the regulations and rules they address social needs which can only be fulfilled by the property.  

Housing regulations- especially affordable housing and rent regulations, also infrastructure, spatial planning, nature and historic monuments conservation and many other aspects connected with the build environment and real estate in particular are in hands of governments 


Supply and demand forces along with price are major factor having influence on activities taking place on the real estate market.  On the other hand properties supply as well as demand is conditioned by the real estate and real estate market characteristics.  

Prices of properties are significantly high among other consumer goods.  Relation between price and demand level looks quite different than on other markets. Property price is not only indicator forcing buyers to make a purchase decision.   As mentioned before real estate plays different roles in everyone’s life (being shelter, place were work can be performed, place to relax, do shopping and so on). It is almost impossible to find a substitute for a real estate. That is why unit price, although important, is often not a critical factor influence buy/sell/ rent decisions. 

Especially during a short term, while demand and also supply are not flexible and do not adjust automatically to the price change.  It is mostly a case on the real estate market that demand growth leads to decrease of number of unoccupied units first. Price growth is an after- effect, while supply can not put on the market new units automatically due to the length of development process.  During long term corrections of demand and supply level influenced by the unit prices are more visible. 

There are following rules of the demand, supply and price level on the real estate market:

  • Property price increases when demand increases or supply decreases. 
  • Price decreases when demand decreases or supply increases. 
  • When supply and demand increase together, price remains constant. 
  • When supply and demand decrease together, price remains stable. 

Demand and supply level are affected by number of factors. Supply is mostly influenced by physical and economic factors, while demand more by social and economic ones. Real estate market is considered to be local, and local changes will influence a single local market more than a global trend. Most significant factors are: 

  • Population: number, age, gender, family structure.    
  • Occupation, income level. 
  • Savings, credit ability, mortgage interest rate. 
  • Unit price per square meter, percentage of not rented space 
  • Property taxes and tax relief 
  • Amount of parcels destined for new developments. 
  • Technical condition of existing property stock. 

Government especially local authorities can represent both demand (as owner and prospective owners) and supply side, especially being responsible for land use regulations and development/ building permits.   

Demand side of the market is mostly affected by local factors, directly related with the area where property is situated. Demography- population number, structure are parameters indicating what kind of properties, how many square meters and so on is needed and will be required in the future to meet property needs of local community. Also employment rate, average income level determines significantly purchase abilities and influence demand for housing units/ office space/ retail space etc.  


Property market is a challenge for analytics. It consists of significant number of characteristic local markets, often influencing each other. Single market may be 

further divided into segments- residential, commercial, industrial, and agricultural. 

Market prognosis is usually based on data about: prices, demand and supply level.  Information about size and condition is also taken into consideration while creating forecasts.    Transaction price on the real estate market is usually kept in secret by parties involved in process. Information about it is confidential and there are now law obligations to publicize it.  Therefore analytics working on prices prognosis often have to use approximate amounts instead of transactions data.  

Statistical data about real estate is often gathered and kept by the statistical offices. Also offices gather information about population, living conditions, incomes of population, prices, and services and so on. All of them may be used by researcher in order to make forecasts about expected demand and supply level. Also real estate brokers, property managers, local authorities, Internal Revenue offices, public notaries have knowledge about market transactions.  None of them is legally obligated to publicize data about transaction in which they participated, but they may share information.   

In many cases market researchers and analysts have to act like reporters hunting for data. Facing information and knowledge age one should be aware that data has a significant value. Those who own it are ahead of everyone else. 

Prognosis often used by decision makers is a powerful tool. Firms and international companies use forecasts while making investment decisions, which in case of property market are long term. Also households, local communities, governments and other market participants’ use and are influenced by the predictions about future prices, available stock and often adjust their decision about purchasing/renting/ selling a property on their basis.  


“The most common definition of real estate is the national stock of buildings, the land on which they are built, and all vacant land. These building are used either by firms, government, non profit organizations, and so on, as workplaces, or by households as places of residence. When defined this way, the value of all real estate makes up the largest single component of national health”.   

Considering role of real estate stock on central and local level it is important to emphasize: 

  • their part in creating GDP  
  • participation in local budgets- income from property taxes
  • number of workplaces created by whole real estate industry
  • amount of investments on real estate market 
  •  role and influence of property market on each household, while expenditures on real estate purchase and exploitation are usually highest among all expenses.  

Data from the last 15 years present that 6-8 % of GDP level in some countries is created by new real estate investments every year, whereas in the USA more or less it is 12 %.

Real estate tax collected every year is usually one of the most significant income sources for the local government. Property owner is also obligated to pay tax when buying- selling/ renting transaction takes place. it evaluated in some countries income created by the real estate taxes amounts around 11 % of all local revenues.  

Market and real estate industry in general create significant number of workplaces. Not only development processes, but also investment, management, brokerage and others engage specialists from different fields. 

Generally around 5-7 % of all employees (professionally active) in some countries perform their jobs on the real estate market.  

In terms of creating and maintaining a value of national stock investments are crucial. Not only new developments but also existing buildings kept in the proper technical condition are important in every economy. About 50% of all investments in some countries are money allocated in properties developments, overhauls and so on.  

Also social role of real estate, especially residential real estate in life of every citizen is crucial. Therefore governments tend to interfere in it especially by creating laws, organizations, structures and financial tools to support citizens, and especially those who can not afford buying or rent a place (usually by Affordable Housing Programs).  


Agency and real estate brokers, their main aim is to bring parties representing demand and supply side together. Broker and agency contact clients in negotiating a sale, purchase, exchange, and rental. In many countries it is required by law that broker has to hold a license to perform his duties on the market- whether it is purchase, rent or other transaction. 

Appraisers- their job is licensed and regulated by law and basic aim of it are estimations of property value. Property appraisals are required and needed in many real estate activities. Valuation professionals are usually hired by owner or future to provide an expertise, while data about property’s worth is crucial to: obtain a loan, assess property tax, insure property, negotiate a sale/ purchase transaction price. 

Developers are engaged in a process of making improvements to real property, which increases its value. Developer may be an individual, but in most of cases partnership, Limited Liability Company is created to conduct a process.   In most of cases they acquire a land parcel in order to construct building projects, which will be sold, or sometimes retained as assets to produce cash flow via rents 

 Property managers, also hold licenses required by the law in order to represent clients. Main objectives of their activities are: 

• Physical management (also facilities management)

• administration activities along with preparing budgets

• marketing activities, such as finding new and maintaining current tenants 

Notary plays important role as a witness of transactions on the real estate market and it entitled to authorize agreements in form of notary’s deed.  

Insurance agents on the real estate market offer product which aim is to secure transactions, investments, developments, also loans, and properties alone in case of natural disaster like flood, earthquakes, and so on

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