Is It The Right Time To Invest in a Property?

Nora Setiawan

June 7, 2020

Buying and owning real estate is an investment that can be both satisfying and lucrative. Prospective real estate owners can use leverage to buy a property by paying a portion of the total cost upfront, then paying off the balance, plus interest, and over time.

Why Is Property Promising For Investment?

Why is property promising for investment?

One of the primary ways in which investors can make money in real estate is becoming a landlord or a rental property. While people who are flippers, buying up undervalued real estate, fixing it up and selling, they also can earn income. Real investment groups are a more hands-off way to make more money in real estate.

Some investors choose to involve and manage their portfolio themselves, while others have full-time jobs and trust investment companies to manage their investment from sourcing the right property to find the right tenants and supervising the maintenance and repairs.

Furthermore, investing in property means that you can secure leverage, a mortgage loan in order to maximize your investment. You are likely to secure a loan from a bank for increasing the amount of money you have to invest in shares.

By investing your money into property, you can increase the value of the investment significantly. If you are spending it wisely, you can add considerably more than you spend. Investing in property somehow is a way of hedging against inflation. With high inflation, your rental income and property would increase significantly, as the cost of living goes up, so will your cash flow.

But with this pandemic going on, a lot of people ask themselves, is it the right time to invest in property? Some people say that real estate is a safe investment, but will you invest your money in a property business at this time?

The Worst Thing Happens To The Property Sector

The worst thing happens to the property sector

The market has slowed down significantly pretty much everywhere, even in places where real estate sales are allowed to proceed more or less as normal. During the pandemic, overall consumer confidence is low, which means they are showing hesitance to purchase something big, like a house. However, sellers are also reluctant to list their homes to be sold. 

According to property consultancy Cushman & Wakefield, this outbreak somehow threatens the recovery of the Indonesia housing market, with sales of high-rise flats likely to fall by 30% in this first quarter.

The credit rating agency, Moody’s noted that, In April the Indonesian rupiah had slid against the US dollar to its weakest level since the 1998 Asian financial crisis had damaged the ability of the country’s developers to pay debts.

Managing Director at Cushman & Wakefield Indonesia, David Cheadle explained that several developers are already facing cash flow difficulties. The COVID-19 outbreak has disrupted developer revenues due to declining sales. It also gives an effect to buyers too, as the social distancing restrictions and work-from-home policies have been applied, and it adds to the constant burden of construction loan interest rates of around 10% to 11% of the loan value.

Due to coronavirus, In March, the sales of apartments were estimated to be lower by 25% to 30% in the quarter than the average of 2.400 units in the final two quarters of 2019. Meanwhile, the sales of landed residential units dropped 2% to 3% from the previous month.

Even though the global economy has been hit by COVID-19, including Indonesia’s economy, the real estate developers and property investors still believe that investing in property is a long-term development.

The Challenges Might Exist For Real Estate

Deputy Chairman of the Indonesian Real Estate Company Association (REI), Rusmin revealed that investment in the property sector will remain attractive, as it can be a long-term investment, like 3-5 years. It is possible that the future of the investors in a property will be brighter.

He hopes that it will be recovered soon as at the end of this year or the beginning of next year. He also added, both obstacles and challenges for the property investment are, how fast is the country to handle this case, like COVID-19. In addition, the Large Scale Social Restriction Policy of PSBB also can be a challenge for new investors and real estate developers in Indonesia.

These problems that need to be fixed are still the same, including the bureaucracy, labor, infrastructure, legal certainty, and incentives.

The Opportunities For Real Estate

Property consultant, Colliers International Indonesia mentioned that, if you prepare to invest a property at a time like this, it would be a smart move. Colliers International Indonesia’s Advisory Service Director, Monica Koesnovagril said, invest in a property, such as purchasing land would take years to begin processing it.

Some of the land that was purchased at this time, are considered to be built as a new project for the next few years. Additionally, when the presence of Indonesia’s new capital city is here and the pandemic is done, it could be able to increase the sales of the property industry in Indonesia.

At this time, for long-term property business, the latest project leasing and sales is expected to be adjusted. Both developers and property owners must have sufficient supply to accommodate demand.

As quoted from Antaranews, investment in a landed house is also a good investment, and they encourage that people should not hesitate to invest in property industry, because it is a long term, while the COVID-19 might be here today, but it will be gone soon. Unlike the property, as the population is more growing, they will need more houses to live in. 

An Indonesian public figure, Ida Ayu Dewi has an opinion, the purchasing power in a property industry, especially in landed houses, would be quite good. She added, if you want to invest in a property, you should consider the location, such as, the distance from public transportation and public health, also the facilitation that you will get later. No matter if it is an apartment or landed house, as long as it is affordable for you.

In conclusion, investing a property is still one of the best investments after all. Whether it is during the normal time, or the outbreak, as long as you have the budget and can pay the loan later, it does not matter. Keep it in mind, property purchasing is a long-term investment and there will always be a right time to invest in property. You can read our articles about the impact of Coronavirus on Indonesia’s property market here.

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