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When Is the Right Time to Invest in Real Estate?

The global real estate market has been booming since the COVID19 pandemic. Many investors are noticing the viability of the market and planning to capitalize on this growth. However, many sectors of the market are currently at all-time highs, and no one wants to buy overpriced properties.

That’s why aspiring investors are unsure whether now’s the right time to enter the market. Let’s review the state of the global real estate market to determine when’s the right time for a would-be investor to make his/her move.

The State of the Global Real Estate Market

From a macro perspective, the global real estate market has been on a bull run since 2009. According to a Wall Street Journal study, the number of real estate investors in the US has doubled since 2009. The continuous growth of the American and the global real estate industry was finally halted in early 2020.

  • In the initial months of the COVID19 pandemic, speculations and rumours caused real estate prices to drop. But, since then, the recovery has been nothing short of fantastic.
  • In January 2021, global real estate inventory declined by a whopping 6%. As a result, in some areas, property prices increased by over 100%.
  • Factors like – historic low-interest rates, low housing inventory, and rising construction costs created severe imbalances between global real estate supply and demand levels.
  • American online real-estate company Zillow still expects the average home value to increase by at least 13.2% in 2022.

Are real estate assets currently overpriced? Yes – like many assets, real estate properties in various parts of the world are currently overpriced. Is investing in real estate now safe? Yes. Although property prices across major urban centres are currently overpriced, they can still go up in 2022 and beyond.

We’re Still in a Seller’s Market

When is the right time to invest in real estate? If you’re planning on flipping houses and booking profits, the right time to invest in real estate is during a seller’s market. In a seller’s market –

  • There’s not enough inventory but a lot of demand. This imbalance pushes real estate values up. We’re currently in a seller’s market. A distinct trait of a seller’s market is that its highly competitive.
  • A competitive seller’s market is not a welcome place for first-time real estate investors. It’s common for first-time investors to get over-excited by the competition and pay inflated prices.
  • Unless investors have long-term plans of generating passive income from their real estate investments, they shouldn’t make hasty purchases.
  • Nevertheless, there still are unexploited opportunities to explore in every seller’s market.

Finding Opportunities in a Seller’s Market

There are certain sectors of the global real estate market that are always strong and ripe. The definition of a “good investment” in such a situation will depend on your long-term goals as a real estate investor.

  • If you want to buy/sell properties to generate short-term profits, the storage industry currently presents a great opportunity. There’s a huge demand for storage space. Owning a couple of warehouses can result in impressive profits in the short term.
  • If you’re entering the real estate market for long-term passive income, investing in rental properties makes absolute sense. Renting is currently at an all-time high. Rental rates across the world have increased steadily since 2021. Single-family rental properties, in particular, are in huge demand. This demand for rental properties will continue increasing as more people aged 20-30 opt to rent and not buy properties.

Final Take

If you’re planning to enter the real estate market as a long-term value investor, the best time to invest is now. The rise of property technology has made processes like buying real estate, finding renters, and even managing properties – easier than ever. Always be capital ready. Start with low-cost investments like REITs. Then, focus on buying real estate properties that will generate long-term value and passive income.

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