Why is this a good time to buy property? Interestingly, the answer to this question lies within the state of the economy and our needs. We will explore factors such as property market cycles, timing in investments, and the present state of the global economy.

The property market has several stages that influence demand and supply of property. The property market is cyclical with its ebbs and flows. Various events provide opportunities for various parties to benefit. When the market is on the upside, it provides opportunities for more development. In contrast, when the market is on a downturn, it provides opportunities for those who seek good bargains.

When there is an upturn, redevelopment can happen since there is demand for property products. When there’s a downturn, it gives opportunities for developers to absorb abandoned projects at a bargain. A property market down cycle occurs when home prices and rental rates have been declining for a period.

A slowdown in the property market normally takes place during periods of slow economic growth or economic downturns. However, when there is economic and property market resilience, there tends to be long term positive demand for new homes.



Timing in investment

Regardless of purpose for property ownership, whether it is for investment or for our own use, purchasing a property is an investment. It tends to be the biggest investment for most persons. Therefore, timing in investment has much to do with our risk tolerance in investment.

Timing in investment is affected by the nature of asset classes and economic conditions. Investing in a single asset class is insufficient for us to meet our investment objectives. When we expand our investment environment from a single asset class to multiple asset classes, and from local to international markets, the risk of focusing in a single asset is reduced.

However, we should also consider our risk tolerance. Each asset class has its own reward and risk characteristics; they perform differently in various economic cycles and scenarios. Property involves direct investments into buildings and land. The advantage of investing in real estate is that you can use leverage on your investment and the value of property increases. The disadvantage is that interest rates could rise, and that property values are related to the state of the economy (where they can rise and fall). They are also less liquid than other assets.

During recessions, investment opportunities occur. A recession can be the best possible time to begin investing because asset prices often fall hard. Investors can pick up stocks, bonds, mutual funds, real estate, private businesses, and others for far less than they could just a few years earlier. It takes courage to invest when the economy is down.



Present state of the global economy

While a recession is currently taking place, we can expect a gradual recovery soon. According to the International Monetary Fund’s World Economic Outlook Update in June 2020, while global growth is projected at -4.9% in 2020, global growth in 2021 is projected at 5.4%. As the COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, the recovery is projected to be more gradual that previously forecast.

Given that property values are related to the state of the economy and that economic recovery is expected to begin in the third quarter of 2020, it appears that now is an attractive time to consider acquiring properties at depressed values.

Mak Academy principal Mak Kum Shi is a master English linguistics trainer with several years of experience in property journalism.