The Next what and when of the REAL ESTATE Market
Over the years, predicting when to invest in the real estate market is one of the most difficult questions to have an answer for. Generally, one tries to answer it by assuming that property is always a safe INVESTMENT; but ideally an investment should be one that makes us money.
There are no correct answers to what would happen next in the Real Estate Market and on the same lines, when should we jump in with our hard earned money and expect high returns if not maximum returns. The best one can do is being observant of a few basic indicators that could help you in making the investment a good one or a great one.
Phase 1: DEFLATION
Market Situation:
1. Government spending in big projects is at an all time low
2. Interest rates by banks are high and loans are expensive
3. Rents are low but not very low to avoid a market crash
The combination of the above three leads to free vacancies in the market as businesses cut down on their productions and require less of space for manufacturing, lack of business activity leads to lower hiring/ jobs and reducing the overall influx of people into an area leading to empty properties/ joint housings.
Investment Tip: Holding onto the CASH for the market to show any kind of response.
Phase 2: RECOVERY
Market Situation:
1. Government announces new projects but no disbursement of payments or any investment on the ground
2. Interest rates by banks are still high and loans are expensive
3. Rents start to slowly increase as manufacturing houses are looking for new properties in anticipation of the increase in demand due to government announcements
The combination leads to filling up of vacancies and increase in manufacturing inventories for businesses leading to a positive impulse in the market. The housing rents start to go up as there are new job creations leading to influx of people into the area and the empty joint housing buildings start to fill up.
Looking at the increase in market demand the Fast movers in the Real Estate market starts to look for new avenues of investment and joint housing. Such projects could take at least 4–5 years but future projections look positive.
Investment Tip: Time to invest the cash into Joint housing projects, as they are still new and Market prices lower and maximize your investment for the future. (Keeping in mind the location and growth indicators of the city)
Phase 3: AMPLIFICATION
Market Situation:
1. Government Projects have either started work or are close to completion
2. Interest rates by banks are lowered and loans become cheaper
3. Rents increase is very high and inflation sets in at all time high rates.
All the upcoming joint housing projects are filling up and the market looks bullish. Further on, new housing projects are announced assuming the boom is set to stay.
Investment tip: The property prices are very high as the rents that can be realized out of them have already been factored in. So, as an investment in the early expansion phase it could be lucrative prospect but in the later expansion phase the prices would eventually plateau so there are not any big gains
Phase 4: HYPERSUPPLY/OVERSUPPLY
1. Government Projects are being used to their full potential, rather show first signs of being over stressed by the local population.
2. Interest rates by banks are constant and assumptions are that they would increase to tackle inflation.
3. Rents start to plateau as the supply of new space has increased in a big way.
4. Big manufacturing houses are no more selling what they manufacture but slowly inventories are building up and competition seems to have increased.
Overall, there are more joint housing projects than the people around in the area. The general view is that everyone around is trying to buy a new place and owning a house becomes very easy. That is the time you know the cycle is all but ready to repeat itself.
Investment Tip: SELL in the early hypersupply or late expansion stage to get the best deal out of your investment. Any investments in hypersupply stage are mainly when you are actually planning to move into the housing project.