Four effective real estate investment approaches when market decelerates

Four effective real estate investment approaches when market decelerates

When the hot cycle passes, and downward momentum gradually appears, it is time to hunt for new opportunity.
07:55, 20/12/2018

General Director of Viet An Hoa Real Estate Company, Tran Khanh Quang, said that there have been signs of market deceleration since the beginning of 2018 in many segments including apartments and resorts. First is the sharp decline in supply, then the slowdown of demand, leading to a quiet market.

Mr. Tran projects that the fourth quarter will be a critical period to determinehow the signs of deceleration will take place, and whether the market will improve. This is a crucial time to monitor the market and make investment decisions at a lower price than 2017 and the beginning of 2018. The General Director presented four investment strategies that are suitable to this deceleration phase:

First, to buy from people who are under pressure to leave the game. When the market decelerates, the downward trend is at a rate of 30%. Therefore, you should choose to buy properties that are needed to urgently sell if it is cheaper at a safe 20% mark. Price reduction at this period should stop at 10-15% a year.

Second, to invest in the most useful products. You should choose center apartments, townhouses or buildings with a façade as these are rare, and their price will increase sooner or later.

Third, to save cash, because in time of deceleration, cash is king. You should invest at the rate of 50-50, meaning only invest 50% of existing cashflow. The remaining is for hunting cheap products when the market reaches bottom (reasonable price range).

Last, to withdraw capital from products far from the center or poorly connected, when the market has leveled off for more than 6-8 months.

Ho Chi Minh City real estate. Photo: Quynh Tran

Ho Chi Minh City real estate. Photo: Quynh Tran

According to Mr. Tran, it is unlikely that real estate prices will fall sharply like it did during the financial crisis ten years ago. The reason being that land fund for project implementation is limited, legal procedures are tightened, and preparation time is prolonged.

However, market will not grow infinitely without revealing some weaknesses or being adjusted. The expert added that market’s downturn period will be challenged during the last peak season of the year.

Over-liquidation of the market will be a psychological pull, lifting the market out of suspicious darkness for the past three quarters. Conversely, if the market continues to be bleak, to lose liquidity, to have poor purchasing power, the risk of a grey scenario may come closer.

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