- Why You Should Buy a Property Now
Real estate has always been an investment of choice to many astute investors. Even investors without experience seem to know that this is a good investment vehicle. The major reason for this frame of mind is the general belief that real estate always goes up and as such, you can’t get it wrong. While this is not entirely true, the natural tendency is to invest more in real estate when the economy is doing great. But when the economy is not doing well, people tend to change their focus. However, in my opinion, this is the best season to buy a property if you can afford it.
There are several reasons why you should consider buying a property now. The first reason is that property is your best hedge against inflation. The rate of inflation in the past 12 months has been astronomical. If you have money kept in a bank account, the value of what you could buy 12 months ago has been seriously eroded. Those who move their money into real estate are better protected against inflation. Real estate has the advantage of retaining value and appreciating to such a degree as to help you recoup any lost value.
Due to the scarcity of funds, many people have resorted to selling their property at a discount.
This means that when you buy a property now, you are essentially buying at less than its actual value. The current price is not likely to reflect the future replacement cost that inflation and devaluation have caused. Since the property market and the economy usually go in cycles, there comes a time when the market will begin its upward swing. If you decide to cash in on that time, you are likely to make a reasonable profit on your investment.
In addition, in a period of uncertainty such as the one we have found ourselves, it is prudent to avoid investments that are uncertain or volatile.
The stock market and foreign currency trading fall within this scope. While huge profits can be made overnight in these markets, your entire investment could be wiped out in a few hours. These investments are affected easily by economic policies, political risks and other factors outside the control of the investor. The real estate sector is relatively stable because it responds very slowly to these factors. It is unusual for a property to lose all its value or a significant value of up to fifty per cent no matter the economic trend. If you want to spare yourself the hassles of reading charts and reports as well as having many sleepless nights, I think you should seriously consider investing in real estate.
Another reason why you should consider this option is the fact that this is now a buyer’s market. The number of people interested in selling their property has outnumbered those willing to buy. In a buyer’s market, many trends are in a buyer’s favour. Sellers are generally motivated to sell, which helps to reduce transaction time. Sellers are willing to sell at a lower price than when it is a boom market. Sellers are willing to consider or offer flexible payment terms. In a buyer’s market, you can make low offers and request for installment payment.
Furthermore, the banks are usually faced with high default rates when it comes to loan repayments. Since most loans are secured by properties, once default rates increase, banks are quick to foreclose on such properties. If you consider the fact that the market is already flooded with private properties, the availability of foreclosed properties will further depress the market. Banks are generally interested in recovering their money and not in selling a property at the best price possible. Banks are only interested in the forced sale value of the property. The net result of this is that buyers have access to cheaper properties.
While I do not recommend this option, banks may also be willing to provide you with loans if you meet their criteria. The only challenge at this time is that the current interest rate regime is simply too high to stimulate any positive activity in the real estate sector. Ideally, when the economy is in a down mode, the interest rate should go lower in order to encourage people to borrow and invest. This is presently not the case but the funds are available if the numbers are right.
Finally, the overall perception is that after the economy has bottomed out or reached a certain low point, the only direction left to go is upwards. Real estate investments are usually a major beneficiary of economic recoveries. Most properties will start to recover their lost value and the prices of properties are likely to reach new highs. Those who invest now are going to enjoy the benefit of their foresight with huge returns on their investment.