Despite popular misconceptions, the real estate market has been on a steady bullish trend these past couple of years. After the entire market was hit by a crisis in 2008, the market has been seen with a pinch of skepticism. Experienced investors are still investing in the best properties across the country, but those who are trying to develop a strong portfolio are quietly shying away from the real estate landscape.
The latest studies show that the market is maintaining a sustainable upward trend, signaling steady growth and telling investors that there are plenty of opportunities to explore. The market is also accommodating a wide range of buyers. Is it time to revisit the property market as an investment opportunity?
First-Time Buyers Sustaining Growth
One of the reasons why the market has bounced back from the 2008 crisis so quickly is a new group of customers entering the market. First-time buyers are taking advantage of the fairer, more reasonable prices of properties to pick up their first homes or apartments. The same can be said for small and medium businesses who are moving away from renting and into owning their own offices.
This series of new customers are also creating some positive changes in the market. Higher demand is bringing property prices back to a more acceptable level, which means more homeowners and investors are willing to put their assets on sale. The entire ecosystem is filled with confidence and the combination of these small factors is what has been sustaining market growth.
Let’s not forget that the financial sector is also making more financing options available. More affordable loans are being introduced and lenders are becoming more accommodating to first-time buyers with a good credit history. There are also new financial products for investors who are looking to buy additional properties, including revamped buy-to-let mortgage loans.
A Market Shift
Property investments are usually seen as long-term investments, made mainly for capital gains. This approach worked really well for a long time, but it is being replaced by more short- and midterm approaches. Investors are no longer aiming at big capital gains as the sole source of revenue, but rather exploring alternative revenue sources along the way.
Buy to let properties are becoming very popular, especially in big cities across the country. Small houses and affordable apartments are attracting investors and selling out quickly. Newer projects can be developed with units already sold; investors rely on the credibility of the contractor and the plans they have in hand before making the necessary investments.
Commercial buildings are gaining traction thanks to the lively economy we have today. As startups and small businesses expand their operations, the demand for bigger, better-equipped commercial buildings in popular areas is on the rise. Of course, investors are quick to pick up on the trend and are making adjustments to their portfolios. Renting out commercial buildings is considered to be a good short-term investment thanks to the high demand for space.
What’s interesting about the property market is the wealth of alternative investments currently available. For starters, the concept of crowdfunding is being adopted by the real estate industry to allow more people to invest in properties. Instead of having to pay for everything yourself, you can now join a pool of investors – known as the Real Estate Investment Trust – and combine resources to construct a healthy portfolio.
REIT investment taps into the same sources of revenue available to individual investment. The collected resources – crowdsourced through platforms and programs – are then used to purchase a group of commercial and residential properties that will produce the most returns. Since property values also bring capital gains to the table, the expected annual return on investment of REIT investments is very appealing.
There’s also the advantage of lower fees and acquisition costs offered by this type of real estate investment. Since individual investors don’t need to worry about fees and costs associated with acquiring a property, the thick entry barrier into the market is no longer there. Instead of complicated fees, investors can review a single fee structure known as an asset management fee to determine if the cost is worth the potential return.
All of these changes and the opportunities available on the market are more than enough reason to revisit the real estate market as an investment. The steady and sustainable growth is said to be attracting old and new investors alike. You wouldn’t want to be left behind, especially since the opportunities available today are too good to miss.
While his background is mostly related to trading stocks, he recently gained interest in real estate crowdfunding with Fundrise.