Should I Invest in Property in 2023? How to Look Beyond Media Alarmism
Is there a real estate market crash in the offing? Has the sector already crashed? Should I even be thinking of investing in real estate? Why is there so much news in the media about properties lying empty with no takers? These questions currently plague a lot of would-be investors. So, these are the questions I get to answer quite frequently. Now one of the things to keep in mind is that sensationalism sells. If the media is talking doom and gloom, it’s because that is what grabs eyeballs. However, a lot of nuance gets lost in this.
There is some truth in the claim that there is a real estate market crash, but there is also a certain lack of nuance here. At least some of those headlines are essentially good old alarmism. When we speak about real estate, it is important to differentiate between commercial and residential spaces. Yes, it is true that the commercial property space is experiencing tough times currently. A lot of office buildings and spaces are lying vacant right now.
The fact is that after COVID, a lot of people want to continue to work from home. People have discovered ways to beat the commute and found joy in working in their pajamas, perhaps. The result is that people now can and do work from home. Hence the demand for office spaces has been stagnating or even falling. Further, rising interest rates have put even more pressure on the commercial real estate space. Some of those who have invested in commercial properties are hurting right now. In that sense, it’s a double whammy.
That said, the situation with commercial real estate is not germane to residential real estate. In this case, demand has continued to rise, particularly in some of the larger metropolitan areas in the Sun Belt states. There is no real estate market crash in the residential property space. Buying single-family homes is still an excellent investing option. Rental incomes are good, and property prices are rising in a lot of places. In fact, there is a shortage of high-quality single-family homes in a lot of markets. These are likely to fetch excellent rental incomes. In areas such as Austin and Phoenix, the property markets shot up during the COVID years. Prices went up by as much as 70% to 75%.
And then there is another reason why investments in residential real estate trumps investing in commercial property – the 30-year fixed-rate loan! It is the one big, unbeatable weapon in the investor's arsenal. This lovely gift that you can use to buy homes, but you cannot use to buy commercial property. This is another reason why residential real estate is booming, and the other kind is not. When investors buy homes, they can use the 30-year loan and remain unfazed by rising interest rates, rising inflation, and prices.
So, is a real estate market crash in the offing? How can you go about investing in real estate? What should you do first? What markets are the best to invest in? I would advise against investing in places like New York, Los Angeles or San Francisco. There is a certain level of saturation in these markets. However, there are plenty of other places you can opt for to get excellent returns on your investment. To know more, drop us a line or just sign up for our free quarterly expo.