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Why You Should Buy a Property Now

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real-estate
  • 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.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

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naira

COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.

This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.

In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.

The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.

Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.

She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.

She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.

Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.

“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.

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Commodities

Crude Oil, Other Commodities Closing Price for Monday

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Crude oil

Crude Oil, Other Commodities Closing Price for Monday

Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.

Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.

The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.

Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.

The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

He said, “The key factor appears to be the (U.S.) currency.”

As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.

Also, the effectiveness of the vaccines can not be ascertained until wider rollout.

Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.

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