Of the new billionaires that made Forbes Magazine’s list in 2014, 20 came from the real estate industry. 14 of the 20 real estate billionaires were from Asia- Pacific nations; seven from Hong Kong, four from China, two from Singapore and one from Australia. In 2014, there were 135 billionaires from real estate. Today there are 163. What is it about investing in real estate that makes it the best investment for you?
Many of the new billionaires in 2014 greatly benefited from the growth of the property market in 2013. Based on Knight Frank’s Global House Price Index which tracked the property prices of 53 countries, property prices by the 3rd quarter of 2013 were 4% higher than their high in 2008. Most of the significant property price increase came from China at 21.6% and Hong Kong at 16.1%.
While investing in real estate will not guarantee you a spot in Forbes’ prestigious list, the increasing number of real estate tycoons the past two years proves one thing: Property is a good, solid investment.
Real Estate is a Hedge Versus Economic Uncertainty.
The new millennium ushered in an era of economic volatility. Political, economic, cultural and societal barriers were torn down by many world changing events that defined the first decade of the new century.
9/11, the 2003 collapse of the equities market, the Iraq invasion, global warming, global recession, the 2009 Euro Zone crisis, the collapse of the Greek economy, Russia- Ukraine tensions and ASEAN Integration were just a few of the important points that put the worlds’ economies and markets on a tailspin.
But through it all, the real estate property market remained comparatively stable. In Australia, for example, real estate prices continue to rise despite pronouncements of a property bubble as early as 2001. As mentioned earlier, global property prices rose despite global economic turmoil in 2009.
The truth is economic fundamentals are just one indicator of real estate property prices. You also have to consider demand factors; increased foreign investments, current levels of commercial development, residential migration, interest rates and weigh these against available supply.
In the case of Australia and the rest of the Asia- Pacific, demand factors are very strong. With Australia, there is a problem of having enough property to meet rising demand from Australians and the international market.
The Asia- Pacific region, especially with ASEAN Integration, is projected to be the next global powerhouse. Property values in this part of the world are expected to rise in the next few years.
Real Estate Gives You Great Flexibility in Investments.
Real estate is an asset that can help you create wealth through flexible investment strategies.
- Real estate is premium collateral for many banks and lending institutions.
With leverage you can acquire more assets with little capital exposure. Why purchase a single property for $100,000 when you can acquire three?
According to FlintProperty leverage is a very risky investment strategy. You should conduct due diligence, thorough analysis and research before deciding on the properties to acquire.
- Constant Stream of Income. While real estate is an asset that appreciates over a period of time, many investors utilize it to provide a steady stream of income.
They develop the property and offer it for lease in the market. The amount of rental income corresponds with the valuation of the area. Thus, the decision to increase rent for a tenant is borne out of necessity to maintain industry standards.
If property values increase, so should rent. If the tenant does not like the increase and moves out, you will someone who will pay for the adjusted cost.
- Generate Income Internally. In addition to leasing the property, you have the option of developing it yourself and designate it as your business address.
Thus, you can generate income internally from your property, capitalize the investment with the income that comes in, improve your cash flow and when the right offer comes along then you will always have the option to sell it.
Real Estate Provides Options for Your Budget.
Credit Suisse believes Chinese investors will spend an average of $6.3 Billion per year on Australia’s real estate property market. By 2020, total investments in real estate from China are expected to total $44 Billion.
The Chinese are buying property in Australia because it is comparatively affordable to China. And the Chinese enjoy life in Australia. They recognize the high standard of Australian education and set up residences for their children.
The Sydney property market is one of the most expensive in Australia but continues to pull in demand from local and foreign investors. If you cannot afford property in Sydney, there are other cities which offer lower priced real estate with great potential for appreciation.
Real estate opportunities abound because land is everywhere. Businesses are always looking for regions to develop and come in when property values are down.
By investing in property early, they are able to establish their asset portfolio while they are building up their business. As business flourishes and scales up, so does the value of the property as it stimulates more demand in the local economy.
Speculating is a big part of becoming a successful real estate investor. You will need a keen eye on the regions that have potential for growth and development. Position early while prices are low then let time take care of the rest.
Real Estate is an Investment You Can Pass On to Your Children.
Real estate appreciates over time. If it has quintupled in your lifetime, can you imagine its worth when your children are of responsible age?
Real estate is a legacy asset in the sense that you can pass it on to your children. This ensures shelter for them in the future plus an investment that covers their financial needs in times of economic uncertainty.
Of course, you will have to consult with your lawyer as there are inheritance tax laws in place that must be respected. But put it this way, many companies listed in the bourse may no longer exist by the time your children have their own children.
However, your investment in real estate will continue to increase in value past your own lifetime.