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Investing in Real Estate in a Recession

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In a period of economic recession, making an investment is usually the last thing on the to-do-list of most households / individuals as the current economic situation looks bleaks and uncertain. Here are 5 reasons to invest in real estate especially during a period of economic recession.

Capital Appreciation

The capital value of a real estate asset will always increase over a given period of time. The premise for this is law of supply and demand. In most markets, demand for real estate surpasses supply. As long as demand exceeds supply, the value of any real estate asset will increase over time. Rarely will a real estate asset lose its value unless in very unusual circumstances such as the sub-prime mortgage meltdown that occurred in 2008.

Added Value 

If you own a real estate asset, you are directly in charge of the property and therefore can take decisions that can add value to the property through various ways such as the upkeep / maintenance of the property or through refurbishments and modifications to the property that will further increase the innate value of the asset on the market. This is unlike investing in the stock market where you do not have control of the company you are investing and decisions are taken on your behalf through a board of directors.

Low Volatility

Real estate as an asset is generally regarded as being less volatile (risky) than stocks. This again supports the notion that with property you have direct charge over the asset (acquired rights) and it is not a pre-packaged investment like stocks.

Inflation Hedge

Investing in real estate gives you the ability to hedge inflation i.e. the increase in the value of your asset is protected against rising inflation. Real estate is a good store of wealth.

Collateral / Security

Having a real estate asset increases your prospects of securing a loan from a financial institution i.e. Banks and Discount Houses. Most financial institutions would rather prefer to have real estate as a collateral rather than stocks before giving out a loan.

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