BuySellBA
Administrator
The reasons why real estate investments can be the star in the world and its risks - La Nacion Propiedades
Source:
February 03, 2025
As inflation falls and major central banks begin to lower their interest rates, 2025 could offer significant opportunities in the real estate sector
By Mariano Capellino
In a context of global economic resilience, the real estate sector is preparing for a 2025 of opportunities and challenges in the main markets of the worldJade Sivori
Read the summary and glossary generated by artificial intelligence.
After turbulent years, and despite sharp increases in interest rates and wars in Ukraine and Gaza , in 2024 the world economy has shown great resilience , mainly in the context of Real Estate.
It is true that growth remains moderate when compared to historical standards. However, as inflation continues to fall and major central banks begin to lower their interest rates, 2025 could offer significant opportunities in the real estate sector.
US housing market faces challenges after interest rate hikes, but recent Fed cuts spark optimism for 2025Photo Pixabay
In the United States, the real estate market has been one of the sectors most affected by the Fed's interest rate hikes .
This is evidenced by the fact that in 2023 the volume of sales of existing homes reached its lowest level since 1995 .
But the Federal Reserve's latest rate cuts , thanks to inflation in November at 2.7%, could help support this market through lower borrowing costs in the coming months.
However, given that many of Donald Trump's trade policies could push inflation back up, it remains to be seen what path the Fed takes in 2025. At the moment, rates are at 4.75%.
Meanwhile, across the Atlantic, inflation in the eurozone stood at 2.3% year-on-year in November. The ECB has therefore cut its interest rate several times, placing it at 3.25%.
Regions such as Malaga and Alicante stand out as attractive poles for investing in properties with high potential for appreciationShutterstock
This has raised expectations regarding a possible recovery of the real estate sector in the Old Continent, which, despite having a better performance than that of the US, has also suffered from high rates.
In Spain, despite the interest rates, house prices are expected to close the year with a year-on-year increase of around 6%.
However, although it remains to be seen how the ECB's rate cut will impact, the reality is that specialized institutional investors can now purchase opportune properties from banks and auctions , with discounts of between 20 and 30% compared to their current market value.
The latter is a consequence of the fact that many assets are about to be executed or are already under the control of a bank or lender that wishes to dispose of them.
It is estimated that there are assets worth more than €100 billion in Spain , with significant opportunities in regions such as Malaga, Madrid, Barcelona, Valencia, Alicante, Murcia, and Almeria , among others.
In Spain, discounts on foreclosed properties open up opportunities for investors in cities such as Madrid, Barcelona and Valencia
Therefore, if a property is acquired at a discount, and as interest rates continue to fall, a rebound effect will occur in property values , mainly commercial properties (which are those that have suffered the most from the rise in rates), so it is expected that, in the next 2 or 3 years, opportunities will arise to divest and obtain extraordinary returns.
However, although the future looks promising, it should be noted that there are always risks involved when investing in real estate.
Therefore, below we detail some of the main risks that you should take into account when making a decision on the matter:
As you can see, there are a lot of issues to consider, so it is necessary to do thorough research before making real estate investments.
Diversifying your investment portfolio across different markets and currencies , and obtaining professional advice from an Investment Manager, will be vitally important issues when it comes to reducing some of these risks.
Diversifying investments across different currencies and markets can reduce risk exposure and increase return opportunities.
In this sense, if the objective is to obtain high returns, an “active investment” strategy will be implemented in which market cycles will be taken advantage of and timely acquisitions will be made in assets that allow value to be added during management.
The key to using a fund manager is that, beyond the fact that they will encourage us to make an active investment, the strategy they offer us will be based on the exposure to the investment profile we want to take.
Active investment in real estate is based on detecting opportunities and adding value during the management cycle. EUROPA PRESS - EUROPA PRESS
Therefore, it is essential that the investor knows his or her risk profile, based on his or her experience, needs, objectives and time horizon , in order to know which asset portfolio is most suitable for that profile and strategy.
In any case, the most important thing to note is that, beyond the advice, the final decision will always be in the hands of the investor.
www.buysellba.com
Source:
February 03, 2025
As inflation falls and major central banks begin to lower their interest rates, 2025 could offer significant opportunities in the real estate sector
By Mariano Capellino
In a context of global economic resilience, the real estate sector is preparing for a 2025 of opportunities and challenges in the main markets of the worldJade Sivori
Read the summary and glossary generated by artificial intelligence.
After turbulent years, and despite sharp increases in interest rates and wars in Ukraine and Gaza , in 2024 the world economy has shown great resilience , mainly in the context of Real Estate.
It is true that growth remains moderate when compared to historical standards. However, as inflation continues to fall and major central banks begin to lower their interest rates, 2025 could offer significant opportunities in the real estate sector.
US housing market faces challenges after interest rate hikes, but recent Fed cuts spark optimism for 2025Photo Pixabay
The current panorama
In the United States, the real estate market has been one of the sectors most affected by the Fed's interest rate hikes .
This is evidenced by the fact that in 2023 the volume of sales of existing homes reached its lowest level since 1995 .
But the Federal Reserve's latest rate cuts , thanks to inflation in November at 2.7%, could help support this market through lower borrowing costs in the coming months.
However, given that many of Donald Trump's trade policies could push inflation back up, it remains to be seen what path the Fed takes in 2025. At the moment, rates are at 4.75%.
Meanwhile, across the Atlantic, inflation in the eurozone stood at 2.3% year-on-year in November. The ECB has therefore cut its interest rate several times, placing it at 3.25%.
Regions such as Malaga and Alicante stand out as attractive poles for investing in properties with high potential for appreciationShutterstock
This has raised expectations regarding a possible recovery of the real estate sector in the Old Continent, which, despite having a better performance than that of the US, has also suffered from high rates.
In Spain, despite the interest rates, house prices are expected to close the year with a year-on-year increase of around 6%.
However, although it remains to be seen how the ECB's rate cut will impact, the reality is that specialized institutional investors can now purchase opportune properties from banks and auctions , with discounts of between 20 and 30% compared to their current market value.
The latter is a consequence of the fact that many assets are about to be executed or are already under the control of a bank or lender that wishes to dispose of them.
It is estimated that there are assets worth more than €100 billion in Spain , with significant opportunities in regions such as Malaga, Madrid, Barcelona, Valencia, Alicante, Murcia, and Almeria , among others.
In Spain, discounts on foreclosed properties open up opportunities for investors in cities such as Madrid, Barcelona and Valencia
Therefore, if a property is acquired at a discount, and as interest rates continue to fall, a rebound effect will occur in property values , mainly commercial properties (which are those that have suffered the most from the rise in rates), so it is expected that, in the next 2 or 3 years, opportunities will arise to divest and obtain extraordinary returns.
Risks in real estate investment
However, although the future looks promising, it should be noted that there are always risks involved when investing in real estate.
Therefore, below we detail some of the main risks that you should take into account when making a decision on the matter:
- Market Risk : Property values can fluctuate due to economic conditions, changes in market demand, and other external factors. A declining real estate market can lead to a decrease in property values and negatively impact investment returns.
- Liquidity risk : Real estate is not as liquid as other types of investments, such as stocks. Selling a property can take time, especially if the market is slow or there is little demand at the time.
- Leverage (debt) risk : Many real estate investors finance their purchases through loans. If the property loses value and/or does not generate enough income to cover the debt payments, the investor could face financial difficulties and the possibility of foreclosure.
- Management Risk : Property management, whether asset management or residential/commercial leasing, is often complex and time-consuming. Tenant issues, repairs, and other aspects of property management can impact the investor experience.
- Interest rate risk : Changes in interest rates can affect the affordability of loans and therefore the demand for property. Higher interest rates make investment more difficult and often reduce asset values and activity in the property market.
- Legal and Regulatory Risk : Properties are subject to local, state and national laws and regulations. Changes in these regulations or legal disputes may have a significant impact on the investment and the ability to generate income.
- Valuation risk : Determining the exact value of a property can be difficult and subjective. Inaccurate valuations lead to poor investment decisions.
As you can see, there are a lot of issues to consider, so it is necessary to do thorough research before making real estate investments.
Diversifying your investment portfolio across different markets and currencies , and obtaining professional advice from an Investment Manager, will be vitally important issues when it comes to reducing some of these risks.
Diversifying investments across different currencies and markets can reduce risk exposure and increase return opportunities.
In this sense, if the objective is to obtain high returns, an “active investment” strategy will be implemented in which market cycles will be taken advantage of and timely acquisitions will be made in assets that allow value to be added during management.
The key to using a fund manager is that, beyond the fact that they will encourage us to make an active investment, the strategy they offer us will be based on the exposure to the investment profile we want to take.
Active investment in real estate is based on detecting opportunities and adding value during the management cycle. EUROPA PRESS - EUROPA PRESS
Therefore, it is essential that the investor knows his or her risk profile, based on his or her experience, needs, objectives and time horizon , in order to know which asset portfolio is most suitable for that profile and strategy.
In any case, the most important thing to note is that, beyond the advice, the final decision will always be in the hands of the investor.
www.buysellba.com
