We are living in unfamiliar times. You are going to see individuals using models, graphs, charts comparing our situation to the 2008 market crash, even worse black Friday. But the truth is, while there are lessons to be learned, no two crises are the same.
There are a set of precedents and trends that we can base our assessment on, even if they come from assuming the worst possible scenarios. As a wise man once said, ” Plan for the worst but hope for the best.” One of the main things we can rely on is this piece of information.
Unless the financial crisis was hitting the real estate sector explicitly, the sector as a whole tends to survive and even thrive in downturns.
That’s the fundamental difference between today and the 2008 crisis. 2008 was a FINANCIAL crisis; currently, we are dealing with an epidemic. 2008 was caused by over-leveraging in the U.S. house market and then selling off the rights to the debt as high-grade investment bonds; we all know how that ended.
A more accurate example might be the 2000 dot com crash. When the internet economy crashed in 2000, real estate prices in San Francisco dipped for a short while (around 6 months) then actually recovered and kept rising until 2008. That is significant since San Francisco is the tech capital of the world and if that city’s real estate was unaffected then it’s safe to extrapolate that the industry as a whole won’t and the sector proved its resilience and thrived.
The same can be said about every other major economic downturn – 2008 crisis notwithstanding as it was explicitly a downturn in real estate. But even that was unique as we don’t have a point of comparison for it.
So what do you do when the economy is crashing. You go into safe asset classes that can at the very least wither the storm or at best have the best chances of surviving it. And as has been obvious in my writing so far – and you’re obviously already on SmartCrowd – so you already know that we would recommend real estate over anything else. But the question is why do we recommend this?
Our model has proven itself to be a great safe haven for our investors. Despite the current market conditions, we set a record month in March where we managed to close 1,000,000 AED + in that month. Our investors find that Real Estate is not just a good way to hide and save their money but also maintain a consistent cash flow over the year.
Another point that will highlight this opportunity is that the market (especially in the UAE) is experiencing a supply-side contraction.
I’m sure you’ve all heard about supply and demand. When demand is higher than the supply, prices go up. If supply is higher, then demand, prices go down. What this means for Real Estate- there are not as many new units coming into the market, meaning the existing properties become more valuable, capital appreciation.
This supply side contraction, will prove healthy to the sector as a whole as it will drive up capital appreciation rates. A welcome unintended side effect. Granted this is not a positive sign for the developers but it is definitely a welcome relief for investors as it will give their investments a chance to grow and thrive.
So the bottom line is this, where everyone sees doom and gloom, we see an opportunity for those who choose to take action in this climate. SmartCrowd is giving you an opportunity to not only save but also grow. Take it.
As we like to keep repeating here:
“Invest in things that you know won’t change”
People will always need a home or a place to set up shop. Real Estate will always be a bedrock of economies that invest in their people.