The real estate market is now!
12/04/2023
I am often asked my opinion about the real estate market. What I think is going to happen. Many, in fact, expect me to validate the opinion they already have formed in their heads! Well, here goes: the real estate market happens now.
Those who want to buy believe that they might as well wait. That houses will go on the market for values much lower than they are now. When I ask when they think this will happen, nobody knows the answer.
Those who want to sell prefer to wait. Although they could get a good deal for their property, they don't believe they can get a good alternative to buy. The expectation is to sell with a rising market and buy with a falling market. Preferably within days, because a house is needed to live in.
Uncertainty influences buyers, sellers, investors, or those who simply need a home of their own. Decisions are postponed, planning is wasted, and action is replaced by doubt and indecision. The perception is that this way there is no risk, no mistake, nothing to lose. Is that so? What all real estate clients want and have always wanted is to make the best deal in the shortest possible time. Why don't they do it then?
Value and Time. The influence on the market!
The real estate market is affected by many variables, but it really happens on these two axes: value and time.
What do we know? There is strong speculation about the possibility that we will have the market flooded with houses. It is believed that the increase in interest rates and the inability of families to afford this monthly cost will be reflected in an oversupply. This oversupply will bring prices down and houses will be at bargain values. Is this really the case? What reduction will we see in this value: 7%? 10%? 50%?
For people who postpone their decision, what value would be acceptable for them to do business? Will the market reach those values?
Let's go in parts:
1. there is a huge shortage of houses for sale in Portugal. This is one of the main reasons why our market, compared to the American and European markets, has not felt the strong impact of the so-called "real estate crisis".
2. Even if the market had more supply, would prices go down that much? Do you believe that a property that was for 300.000 euros will go to 240.000 euros and suffer a 20% reduction? Was the market so disproportionate with the prices? Are we now going to see radical adjustments in a matter of 4, 6, 8 months? Will the banks allow the vast majority of their clients to default? Will they be willing to lose a large volume of business?
3. Will the strong demand reduce? It is factual that there is a reduction in the granting of credit. Far fewer people are turning to the banks for loans and to buy a house. However, they still exist. If two months ago the values were low, we can already feel an upturn. The expectation is that this value will increase consistently. It may surprise you, but we still have clients resorting to credit and buying houses.
The demand is also led by families, investors and foreign clients with equity. Banking issues do not affect their buying decision.
3% decrease in 2023 in the value of houses
The market is characterized by cycles. Ours has been on a long upward trend. In the last 10 years a real estate asset has appreciated about 70%.
The cycle has changed. There is no longer that growth. What do analysts tell us? There is unanimity among several entities that the market has changed. They point to average falls in property values in Portugal of between 1.5% and 4.5%.
The Financial Times (FT) foresees that by the end of the year the value of houses will fall 3%. In 2024, it will already be worth 0.5% and in 2025 it will be worth 2%. The BPI puts forward a forecast of -1.5% until December 2023.
If we consider the FT, a house with the current asking price of 300,000€ can see its value reduced by 9,000€ after 9 months. Is it worth the wait? If you find the house you want now and take advantage of the current average discount value in each transaction? The current average discount realized in Portugal between the asking price and the real sale value is 7%. In short: if you buy that house today you can get a discount of 21.000€. You don't have to wait 9 months based on a hope of getting 9,000€ less.
And who wants to sell? Are you going to wait for a market of some stagnation and greater uncertainty? The international market will certainly go down. In Portugal the probability is that it will stabilize. Who wants to sell what does he/she gain with the 3% drops?
Good business is at the door. Now!
Between downs and ups, the market of sellers and buyers, I believe that the market is characterized by the present.
It makes no sense to be in the market stuck in the values of the past and afraid of the values of the future. The market is what it is. Now. There is time and space to make good decisions and do good business. It is critical that these decisions are informed, supported with credible data, responsible and enlightened financial analysis. This way you can achieve what you really want: the best deal in a short period of time.
Don't postpone your life, or the achievement of your dreams. Waiting will, at the very least, waste your time and money.
The best time to make a good deal is NOW.
Seize the opportunity!
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