Are you running with the heroes?
Is there a right time to invest in real estate? This is a question that I have heard more than ever before in the past 14 to 15 months, especially with the economic instability that Sri Lanka experienced since early part of 2022. Although, prior to that we saw signs of economic instability looming with the lack of emphasis accorded to fiscal and monetary policy.
I decided to take some time to shed a bit of light on this subject as to when to invest in real estate. The general pattern is when the interest rates are low people flock to buy real estate whilst when there is an increment in interest rates people flock around treasury bills and fixed deposits. This pattern is very prevalent when one looks at Sri Lanka.
However, when the interest rates are increasing is when the expert investor moves into the real estate market as he requires his investments to be hedged against steep levels of inflation. This is what was witnessed in 2022 once Sri Lanka defaulted on the debt repayment. We witnessed smart investors moving into secure funds through purchasing solid real estate. For instance, when treasury bills were offering over 30% at a time when inflation was at over 60% where does one win by investing in fixed deposits. This is where one needs to closely understand the real estate market and its beautiful dynamics.
Today, the interest rates have dropped below 25% which is a very positive sign. Nonetheless, in the overall context it is still on the high side. Therefore, it is still an ideal time for people to move away from fixed deposits and move towards investing in real estate. This is further highlighted as the interest rates drop and the demand for real estate increases, thus leading to the simple equation of demand and supply. As a result, the smart thinker should focus on the real estate market and identify how he or she can maximize the upturn.
In addition, the present environment concerning Domestic Debt Restructuring (DDR) is causing panic in the stock market as seen through the noticeable and sizable reduction in the daily turnover. Furthermore, DDR might have an impact on deposit holders. As a result, what are the best options available for investors other than looking at real estate.
Therefore, be bold and act bold to capitalize on the opportunities that are seen in the real estate market. Do not try to run with the herd but run with the heroes!
Juniper Group! CBH Lands!
