Is There A Right Time To Enter The Real Estate Market?

Is now a good time to invest in real estate?

It can be overwhelming to keep up with all the news on the coronavirus in the media, but with so much going on in the press right now, we hope to provide you some clarity about what to do next.

The ideal time to enter the real estate market is when?

The constant concern of today's investors, whether they are in the stock market or the real estate market. The constant concern of today's investors, whether they are in the stock market or the real estate market.

To set the scene, let me first mention some broad tendencies. As of April 21, 2020, a number of significant global initiatives have been implemented to defeat COVID-19.

1. The US is injecting trillions into its economy.

2. China has invested billions to promote consumer spending

3. The UK has unveiled a $400 billion euro "wartime" bailout plan for its economy.

4. To encourage and facilitate lending, nearly all major nations have dropped their interest rates to record-low levels.

5. Japan and Europe have also pledged hundreds of billions to buy bonds and support businesses' ability to remain solvent.

Maybe never in history has the globe been so united in pursuing a single goal.

Consumer attitudes and money velocity are at the core of the issue; individuals are less optimistic about the short term and aren't spending as much as they used to, which on the other hand also implies that they aren't earning as much.

Is it worthwhile to purchase a fresh launch property?

When the music stops, confidence falls, and we must prevent that from happening because failing enterprises and lost employment may never be made up.

Our government in Singapore has invested an extraordinary sum of money to maintain the viability of large corporations and SMEs, employee retention, and consumer spending.

Government activities suggest that all out effort is being made to keep as many people afloat as possible throughout this crisis.

Will the world's governments then be able to stop a new "Great Depression"?

It must be done and will be done as long as people recognize this as necessary, even if it means amassing enormous national debts for generations to come.

Furthermore, the Great Depression years did not have access to the policy instruments (read: printing of fiat currency) present today.

When, not if, is the question.

Three essential things must happen for confidence to rise and a recovery to occur:

1. The virus must reach its peak and then gradually diminish.

2. The vaccination must be located.

3. A treatment must be created.

So with that said, will a correction happen in the interim?

Yes, our research and intuition tell me.

Some people could accuse me of engaging in confirmation bias, but we work in the real estate industry, so calling the market negative is the last thing we would want to do.

Sectors are already being severely impacted, and despite the government's best attempts to postpone mortgage payments, cancel contracts, and offer inexpensive liquidity, there will still be gaps through which people and companies will fall.

Due to decreasing demand, the oil industry is currently experiencing a double whammy that creates new issues for jobs, expenditures, and wages. a typical catch-22 predicament.

the best time to purchase a property

But does it mean we shouldn't reinvest our funds in reliable assets?

Obviously not.

Crisis situations are exactly when opportunities present themselves.

Although the aforementioned is a cliche by this point, we don't intend it in a corny way.

It is an issue of when, not if, emotions, spending, and consequently asset prices will revive.

People respond to news stories like herds do to a shepherd's call because it is always reported in retrospect.

The recovery phase would have begun if and when the major media outlets started announcing a steady drop in new cases or the creation of vaccinations and treatments.

Would there still be excellent discounts around then?

Perhaps, but you can bet that, like in China, the crowds will return quickly and angrily in part due to pent-up demand, and sellers will be considerably less amenable to negotiating than they are now. (The housing market in China rebounds)

Get to the point.

Then, when is the ideal time to enter the real estate market?

Is now the perfect time to make a real estate investment? Is there ever a most secure moment to enter the water?

The solution resides in a notion known as:

Finding assets with prices below their intrinsic worth is known as the "margin of safety."

Similar to stocks, nobody can predict when the market will bottom, thus we strongly advise against attempting to do so.

Many people who have attempted to time the market in the past have missed several cycles and experienced the agony of missing out, which is made worse by their advanced age and smaller loan amount and tenure.

We sometimes blame this on people's propensity for passivity, which makes waiting (and hoping) for the perfect circumstances easier than actively bringing about the appropriate circumstances.

Instead, we should concentrate on actively looking for discounts.

Particularly in the current environment, where more people are forced to sell off their assets to stay afloat and some developers are pricing their projects with favorable risk premiums included.

Your individual risk tolerance and expectations for the market's performance will define your margin of safety.

Investing with a margin of safety

If you were offered a float, would you be willing to dive in?

Some are willing to invest with a 5% margin of safety below the value, whilst anything less than a 10% risk premium is insufficient for others.

We personally like to evaluate it using the rental yield method based on current rentals.

We anticipate minimum gross rental returns of 4% for residential properties in the core central region, 4.5% for those in the rest of the central region, and 5% for those beyond the core central region, given the elevated risks associated with investing now.

Yes, it is debatable if rents will decrease even further if the crisis persists, but we are willing to accept the risk.

As a result, we are actively looking for opportunities that meet my criteria and chatting with agents rather than waiting for the ideal moment.

What happens if the market declines further or rents increase?

It is acceptable since we have already included rent fluctuation, make sure we have enough holding power (to avoid realising losses in the event of future corrections), and am confident in my ability to hold out for an ultimate rebound, which, fingers crossed, takes place within 15 to 18 months.

In summary, finding the ideal moment to enter actually has nothing to do with timing. Instead, it involves actively setting up the circumstances so that the ideal investment property can be found.

Focus on locating properties with intrinsic value at a discount and any time can be the correct moment to invest rather than trying to time the market, which is impossible.

We sincerely hope that this post helped you shift your mindset and better take control of your investment journey. If it did, leave a comment below and tell someone who could use these tips about it!

About The Authors

With over two decades of experience in the industry, the couple Mortgage-Bankers-turned-Realtors, Jan Tan and Leonard Cheah have been providing valuable and unbiased solutions to Home Owners & Seekers.

With a fusion expertise on real estate and mortgages, Property Bankers have helped their clients to make informed decisions that aligns with their unique needs and financial capabilities.

Their approach is transparent as they provide all the necessary information and support to help our clients navigate the complex and ever-changing real estate market. Trust them to be your guide in your real estate journey. Contact them today for a one-time free 30-min consultation.