Understanding the real estate cycle: Things to consider when Investing in property today

Real estate has generally been deemed as a good investment over the years. As the country begins its recovery from the pandemic more than two years after it started, many are looking to invest in the property market to ride along the growth of the economy.

But with changes brought by the pandemic, there might be a few new things to consider before investing in a property today.

Lobien Realty Group Inc. (LRG) CEO Sheila Lobien said there are at least three changes in post-pandemic real estate investing.

Cycle

The first is that investing opportunities are created based on the real estate cycle.

“The pandemic-induced recession resulted in an abrupt ‘recession’ stage in the real estate cycle which means there is a huge opportunity for those who will be able to ride the ‘recovery stage’ of the cycle, meaning greater returns or benefits for those who will be able to buy or invest at lower prices,” Lobien said.

Pandemic-proof

Another change seen in real estate investing is the preference for pandemic-proof properties.

“This includes more space and sunlight to ensure health considerations are included in the development or choice of property,” Lobien said.

For residential units, Lobien said bigger space is better as this allows the different members of the family to have their own space for their own activities such for work, school and exercise, etc.

In contrast, for those looking to invest in office spaces, there is a preference for more space allotted per employee to lower possible infection rates as well as inclusion of air filtration in air-conditioning units, among others.

“Mixed-use developments will also be more preferred now to address transportation and access issues (access to supermarkets, office, drugstores, hospitals, etc.),” Lobien said.

Credit

In addition, Lobien pointed out that the low interest has also allowed those with access to credit to maximize the current situation to create more value out of their real estate investments.

Volatility

For his part, Cushman & Wakefield Philippines director and head of Research, Consulting & Advisory Services Claro Cordero said what has changed in the past two years is how volatility is factored in the investment decision.

“Both individual and institutional investors are now considering the various risks and challenges in the economy – the ongoing Ukraine-Russia war, the period of hyperinflation and the unpredictable rise in the COVID-19 virus due to the discovery of new and more transmissible variants,” Cordero said in an email.

“Property investors now look for long-term growth and resiliency manifested by stable balance sheets and attractive dividend growth potentials. This led to the rise in popularity of novel investment vehicles such as the real estate investment trusts (REITs),” he added.

Clean & green

Apart from long-term growth prospects, Cordero said investors are also considering “clean and sustainable growth” when it comes to making property investments, particularly those that conform with their respective Environmental, Social and Governance (ESG) targets.

“Transparency and sustainability become important factors to consider when investing in a property,” Cordero said.

Good location

Asked what are the main considerations that one should make before investing in a property, Lobien identified three factors namely location, developer and timing.

“A good location means being in an earthquake- and flood-free area, access to transportation, activity centers, office, school and retail spaces,  and may have future opportunities as a result of government and private developments in the area that will add value to the property,” Lobien said.

The developer should also have a good track record with high quality property developments to its name.

“Lastly, always ensure that you buy low to maximize property appreciation; here, it is important to study the prices and also the market to be knowledgeable of the best price,” she added.

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