According to a recent report by the Investor that details the real estate market share in the US, capital demand for properties has remained at record levels, though the year-to-date volumes have dropped by around 11%.
Nonetheless, this business sector has been an important component not only of the US economy but also those of other countries. Evidently, more and more Americans and non-citizens have been investing in residential and commercial real estate, like houses, office buildings, storage facilities, hospitals, parking lots, retail properties, hospitality establishments, and more.
A November 27, 2017 report by Bloomberg predicts that the US economy is poised for growth in 2018. It states:
“Since the recession ended in mid-2009, the U.S. economy has averaged annualized growth of just 2.2 percent, and the Bloomberg consensus forecast does not expect it to grow much faster in the year ahead. Estimates of real growth are just 2.4 percent in 2018. Some forecasters assume a stronger expansion as a result of the Trump administration tax legislation. Our sense is that the consensus appears awfully complacent, as growth is picking up regardless of changes to fiscal policy.”
With that, experts assume that both residential and commercial property markets will see brighter days in the months ahead.
Needless to say, investing in real estate will be a wise decision to make for next year. However, there are bits of important information that you should know first before jumping on the bandwagon. It is only then you can assure that things will go your way.
Here’s what you need to keep in mind:
- You can participate in the real estate market as a direct owner or landlord. Depending on your situation, you can be a mutual fund that allocates a portion of your holdings to real estate. Or, you can purchase stocks in a real estate investment trust (REIT) or a residential or commercial builder. Either way, go for an investment option that suits your venture.
- Retail real estate has been categorized by PricewaterhouseCoopers (PwC) and the Urban Land Institute as the least profitable among all types of commercial real estate in terms of investment and development prospects in 2018. This means that it should also be at the bottom of your list.
- REITs are important investment vehicles if you want to focus on commercial properties. Basically, they contain securitized portfolios of commercial real estate, such as offices, apartments, retail shops, parking lots, storage facilities, hotels, and even farms.
- Property-value appreciation is expected to dampen in the secondary and tertiary property markets, as rent recoveries mature and cap rates level off. So, instead of focusing on it, you should look more into cash flow and asset management.
- Canada has the biggest number of investors in the US commercial real estate, according to JLL Research and Real Capital Analytics, accounting for 30% of such properties during the first half of 2017. It is followed closely by China, Singapore, and Germany. Now, you know who will be your fiercest competitors in the market.
Most importantly, you should remember that real estate is not necessarily a countercyclical sector. While it does offer great opportunities during a bullish economy as employment soars and property prices and demand rises, it can also go down when the rest of the country’s economy experiences a sharp turn.
How you will become successful in your investment choices basically depends on the right timing, so research carefully.