It would be fair to say that the real estate market has seen its fair share of ups and downs over the last decade. We had one of the worst crashes in history back in the Autumn of 2008. But, contrary to what many analysts expected, property prices bounced back. In fact, in many places, property prices have continued to rise.
This should send a signal to investors that they should invest in property. It’s good evidence that the housing market is actually propped up by fundamentals and not mere market sentiment. Here are some reasons why it’s a good idea to invest in property in 2016.
Real Estate Is Still A Good Long-Term Investment
Why is property so attractive to so many people? Well, for one, there is no counterparty risk. Thus, a property is a great place for you to stow your money over the long term. Once you have the bricks and mortar to your name, you’ve essentially built your wealth.
Contrast that to those who hold all their assets in stocks and shares. At any moment, the value of those assets can go to zero if it turns out the underlying company is not viable.
Prices Remain Low In Some Areas
House prices have always varied from region to region. The key, however, is to try and work out which regions will experience an increase in prices, and which will experience a decrease. Sites like investinginproperties.org host plenty of advice on how to locate a property. Remember, you want to buy a house when it’s cheap, and then sell it when the price rises. Find places that have been earmarked for large-scale development in the future.
Interest Rates Remain Low
It seems like interest rates are going to remain low for the foreseeable future. Central banks are between a rock and a hard place. On the one hand, they need to raise interest rates to restore sanity to asset markets. But on the other they can’t raise them without a large number of people defaulting on their debts.
It seems likely that they will choose to keep interest rates as low and long as possible. And as a result, investors can expect a favourable investment environment for some time to come. What it means in practice is that investors take on less risk each time they buy a house. They can take it on, do it up, and then sell it, only incurring small interest charges in the interim.
The Rental Market Is Booming
Even though interest rates are low, many people are choosing not to buy a house. That’s not surprising, given the extra responsibilities and the possibility of a future rate hike. But they still have to live somewhere. And many are choosing to rent.
The consequence is that the rental market is booming. Rents continue to rise faster than inflation. And with interest rates so low, they often easily cover the cost of mortgage repayments. What’s more, with so many people having enough savings to make a down payment, the rental market looks set to remain buoyant into the future.