Written by: Margot Mora
Buying a home is one of the most profoundly rewarding experiences of modern-day life. However, in 2021, investing in residential property doesn’t garner the same optimism that it did previously.
In fact, despite the surge of available properties, many potential investors are finding themselves questioning whether now really is the right time to invest. The economic disarray that Covid-19 threw everyone into has (quite naturally) made people weary of long-term investments, and the younger generation’s indifference to property investment hasn’t helped.
So, what does this mean for the future of residential property investment?
Well, there are several different opinions on how things might pan out for the real estate market in 2021 and beyond.
In this article, we will outline them and provide some clarity on what to expect from the future of residential investment—both in the US and around the world.
Why Aren’t As Many People Investing In Residential Properties?
Every year, American citizens spend billions of dollars on real estate. The decision to invest in home property is closely tied to the classic “American dream” story, in which families buy and live in beautiful homes for the rest of their lives… all the while remaining in a state of enormous debt.
The middle class are the drivers of residential property investment. However, because most of them do so using borrowed money instead of money they actually own, many end up carrying thousands of dollars in debt well into their retirement years.
This has been the standard practise for US homeowners for the last few decades. But recent times have dramatically changed the way people perceive such a hefty investment.
The combination of a weak economy and major generational differences between Baby Boomers and Millennials are primarily responsible for this shift in attitude towards property investment, and it’s about time we dug into why.
Millennials Are Not As Interested In Real Estate
There are many marked differences in the way Millennials versus Baby Boomers tackle life. But perhaps one of the most significant ones is their attitude towards property investment.
Numerous studies have reported that Millennials value travel over real estate, making them more likely to spend the money they’ve earned on overseas trips rather than buying a home. In addition to this, the combined aftermath of the Great Recession and exorbitant student debt rates have made Millennials much slower to invest in property than their parents were.
To make matters even more complicated, Covid-19 has funneled more Millennials than ever back into their parents' homes. A whopping 52% of 19-30-year-olds are currently living in their family homes—a percentage matched only by those from the years of America’s Great Depression.
All things considered, Millennials have very few reasons to invest in residential property right now. But because they now make up the vast majority of the US population, their approach to real estate is a huge factor in how the market will unfold over the next few decades.
The Economy Is Not As Strong As It Was Previously
It’s no secret that the global economy has taken more than a couple of hard knocks over the past two years.
Even before the pandemic hit, many people looked to the future of the world’s economy with a fair degree of pessimism. But the long-term effects of Covid-19 are guaranteed to disrupt global industries to a much greater extent than we could have anticipated prior to 2020.
However, the real estate market has responded to the economic crisis by providing low mortgage rates and more accessible housing for buyers. Many people have unexpectedly jumped on the residential property investment bandwagon in 2020 due to a desire for safety and security.
It’s hard to tell where things are headed for the residential property investment market. For now, it’s safe to assume that most people are not looking to spend their savings during such an unpredictable time of history.
If You Do Invest In Residential Properties In 2021…
Despite the population’s struggles with property investment right now, the future of real estate is not all doom and gloom. In fact, many studies suggest that this lapse in motion might give way to an economic boom. Which is likely to be accompanied by increased interest in property investment of all kinds.
According to Forbes, 6 million residential properties were sold during 2020, and the average price per home actually went up by 5%. And while there has been a migration from more expensive housing, affordable homes are likely to be in high demand as unemployment affects people’s ability to remain in their hometowns.
However, that doesn’t mean anyone should venture into investment blindly. Anyone interested in residential property investment in 2021 or beyond would do well to bear in mind the following:
1. Don’t overspend
This one might sound obvious, but many people’s eyes tend to get bigger than their bank accounts when property hunting. If you’re going to invest in a residential property, make sure you understand all the related costs, from mortgage payments to landlord insurance and everything else in between.
2. Try not to buy into hysteria
In the midst of our current economic state, it can be tempting to give in to that rising panic you feel in your chest. A sense of anxiety is pretty natural in the face of a worldwide pandemic, but giving into panic is not going to do you any favors—especially when making an investment decision.
3. Refuse to settle
If you’re in a rush to buy a home for yourself and your family, you may feel pressured to put money down before you’re ready. Investing in property is a big decision that requires plenty of deep contemplation and consideration—refuse to settle for anything that doesn’t feel 100% right.
4. Stay calm and rational
When it comes to making a decision like property investment, you quite literally can’t afford to be hasty. Maintaining a clear head and open mindset will allow you to make a sound decision that you benefit from for years to come.
Investing in property isn’t dead. It’s just different. It can pay off, and the secret to doing so wisely is to research, know the market, and ensure that you’re not putting yourself into debt you cannot afford.
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