Is it worth investing in real estate in times of crisis?

The economic slowdown and rising inflation have a strong impact on consumer sentiment and raise questions about securing capital.

So is this a good time to invest in real estate?

The changes taking place on the market as a result of the coronavirus pandemic may prove to be an ideal time to buy real estate, which performs much better than stocks and bonds. 40% of Poles think similarly, for whom – according to a study by the Homo Homini institute, commissioned by Deutsche Bank PBC – investing in real estate is one of the safest in times of crisis.

Banks have reduced the main interest rate to a record low, which makes investing in real estate much more attractive compared to deposits that were popular until recently. Low interest rates also stimulate demand for real estate and increase the willingness to buy apartments to protect savings.

PKO BP report in turn, it shows that the spring lockdown in 2020 slightly slowed down the sales of apartments on the developer market in the second quarter of 2020, but improvement occurred already in the third quarter. Sales of housing loans also increased. Real estate prices on the primary market increased in most cities, but slight declines were noted on the secondary and rental markets. The reason for limiting the price decline is, among others, increase in prices of construction materials, very noticeable in the first quarter of 2021. According to the National Bank of Poland, in 2021 we can expect stabilization of apartment prices.

The National Bank of Poland also indicates that the current level of rental rates in long-term leases has not changed the level of the apartment rental profitability index.. With lower interest rates, property owners may accept lower rental returns. To avoid the risk that the apartment will remain empty (and, as a result, will not generate profits), owners can use… rent pooling.


Real estate less sensitive to volatility


History has shown time and time again that real estate investing can be associated with predictability during recessions. These investments have been among the most important strategies for investing money for years, regardless of the economic, political or social situation.

Slowing markets mean many people are looking for the best way to protect their cash. No wonder, because investing in real estate at the right time allows you to achieve profits that exceed inflation. The crisis in 2007-2009 already showed that investing in real estate provides stable income, without significant drops in value, unlike, for example, the raw materials market.

Like any investment, adding real estate to your portfolio comes with risk – especially in the current market conditions. Therefore, it is important to carefully analyze the location of given properties and their future potential and potential threats. It is therefore worth checking whether, for example, the industry in a given city could suffer as a result of the crisis. Elements to eliminate the risk of short-term volatility should be analyzed. It is also worth adding that The premium real estate market is the most resistant to market fluctuations, as it is the least susceptible to sudden price changes.


A safe investment for difficult times


Maintaining long-term savings in products dependent on interest rate policy carries the risk of losses and a much better way to secure capital is to invest. Times of crisis offer the best investment opportunities for the prepared, and real estate is invariably one of the least risky forms of capital investment.

Industry specialists agree that from an economic point of view, purchasing an investment property at this time may bring benefits.

They also emphasize that the relatively low correlation of real estate with stock market movements makes it a good choice during a recession.


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