There is an old adage in real estate that says, “know where the people are going and get there first’. Investors make money not by following the trail of the market but actually predicting its direction. For many reasons, this is more foreseeable than guessing the fluctuations in the stock market or let’s say foreign exchange trading. Furthermore, real estate is the only investment where there are no mistakes that cannot be corrected by time.
But how do you know where the market is going? How do you spot a growing trend? More adventurous trailblazers even start trends and they usually start by solving a problem, just like most market driven consumer products. Some examples of recent trends which I am going to discuss in more detail in my coming articles are the Co-living spaces like student dormitels or corporate dormitories and Unit sharing for workers who want to live near their offices but cannot afford to rent condominium units individually in the CBDs. These new changes in the workers lifestyle came about because of the worsening traffic in the metro. ( but what will happen when the infrastructure and mass transportation improves? That will be another trend ). What is really driving the Co-working spaces? Why has property prices in the bay area surpassed the Makati CBD in just a short time?
What are the other drivers of real estate that makes people, or the market move in certain directions? Prices, lifestyle, traffic, technology, foreign interest, environment, and even politics strongly influence market movements. For the giant developers who actually ‘create values’ even in vast vacant lands by building not only new townships projects but even large modern cities, they really draw people to move and live in their communities. For the boutique developers who may just have single projects, they have no choice but to ride on the wave created by the big players with the objective of capturing a piece of the market by using their price advantage. Being small and agile, they are also able to serve some very specific needs of their target market and at the same time give very attractive offers.
What really pushes up the prices? For one who is new in investing in real estate, out of a lot of considerations, the most important thing to look for is the ‘real demand’. Just depending on the hype being promoted by unscrupulous sellers about superfast sales take-up of units is really not enough. Some of these may actually be artificial demand created by the bulk investors who are in the business of highly leveraged flipping. People should look at the real demand for actual end users or its potential for rental income to generate positive cash flow. Coming in too late in this kind of trend, especially if one got in an artificially priced unit may spell disaster for a rookie investor.
Making money in real estate is all about anticipating trends, whether going up or otherwise. Knowing when to buy, and when to sell. Knowing how to use leverage and timing is really the key. It is for this reason why I am starting this column. I would like to share what I have learned from a lot of expert investors, from impulsive and inexperienced buyers who have made mistakes, from what I have studied both here and abroad, and from what I have personally experienced in my investments. I aim to share valuable information that may be used by people who are thinking of investing in real estate in the Philippines. - #IAMrealestate
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