We’re in the midst of a pandemic and the economy is at its worst in years.
It surprises many, but people do buy real estate during a crisis. The graphs below can help better illustrate and explain why they do?
The yellow line represents the GDP growth of the Philippines or indicates its level of economic activity. Notice how it dips in times of crises and recovers? The slopes, if upward, spell growth. While downward slopes mean a slowdown.
The blue line is what we’re interested at as it represents real estate values. Property values rarely go down, and when they do during crises incidences, they’re comparably mild fluctuations. Generally, property prices appreciate through time. They’re less volatile, and more stable.
Now, to be more specific, let’s look at the Stock Market’s performance as represented by the PSEI (index). In the graph below, it’s the blue line. It more closely resembles the GDP curves above, right? It’s even more “jagged,” meaning it more easily reacts to situations, good or bad. When that line dips, it means, money is taken off the stock market and placed elsewhere.
Where do you think will the investors keep their funds? Piggybank? Many decide on placing them on real estate. It may be less liquid, but property investments provide more advantages. Depending on the type, some properties can be leased out and become a source of recurring income. This is while its property values continue to rise. One can even use them personally.
Some property developers caught with excessive inventory in times of crises offer discounts or friendlier payment terms just to generate some cash. Those who bailed out from stocks or other money market investing will take advantage of such offers. Hence, it is really no wonder why people (to include yourself) continue to buy real estate now, amidst a pandemic or in the midst of crisis.