Is it worth investing in real estate if there is another crisis?On December 1, 2019 by admin
Real estate investing provides long-term returns above inflation. In the United Kingdom time series (Hungarian is unavailable for such a long time), the value of real estate tripled over 40 years over inflation.
A staff member of the MNB said that in the next 1-2 years he did not see any factor indicating a decline in real estate prices, and that the reason for the increase in real estate prices was the low financing environment and the purchase of real estate for investment purposes.
Why do so many people systematically think that they are investing?
In a different environment from the one before 2008, why not expect a massive credit crunch like before? 1. Borrowing rates are much lower, with a 15-year fixed rate on mortgages already at 4.19%, while in January 2007 the average rate on fixed-rate mortgages over 5 years was 9.96%.
People are not in debt in foreign currencies, so capital debt cannot increase. 3. In 2014, the MNB significantly regulated the conditions of borrowing, as debtors can repay up to 30-60% of their aggregate income, and the former guarantor, who could “improve” the creditworthiness of any person, was eliminated.
Alternative investment yields dropped significantly
For example, 10-year government bond yields were 7.05% in January 2017 and 2.86% in March 2019. 5. Real wages (already reduced by inflation) increased from HUF 114,282 in 2017 to HUF 219,122 in 2018, thus almost doubling.
Of course, at any time there may be a crisis, someone as lousy as the person who invested in the chart above in 1998, whose real value has only reached their purchase value in 15 years, but who buys in the long term and does not sell the property you will not lose your purchase even then.
And even at the worst moment in 40 years
The value of your property has increased with inflation, so it is a legitimate assumption to increase the value of your property with a minimum of inflation during a yield calculation.