My Realty Gains

In the last few years, the real-estate sector has flipped significantly. The demand for investment capital and private capital has been increasing since ever. With people looking in new opportunities and moving into flourishing residences, there is a desperate need for increased living space. Whether it be a developing state or a developed one, with a boost in the economy since the last decade real asset as an asset class is emerging above the waters. 

As we step into the beginning of a new decade, changing demographics have surfaced and brought in with itself all kinds of developments and brighter possibilities. It is believed that a puddle of prospects lies in 2020 and beyond. It is also speculated that the global institutional-grade will enormously expand from US $29.0 trillion in 2012 to US $ 69.0 trillion by 2030. The emerging economic boom will eventually lead to better housing facilities, smooth tenant relations, and clearer property rights. 

Currently one of the major beneficiaries in Multifamily is- Lower Cap Rate and Higher than ever Property Trades. With baby boomers entering their retirement terms together with millennials stepping up, investing opportunities are lighting up. According to the US Census Bureau the number of adults aged more than 65 would be 88.5 million by 2050 which is more than double from what it was in 2010 (40.2 million). Whereas, for every 10% increase in student loans, the possibility of becoming a homeowner for an echo boomer/millennial goes down by 1-2%. Consequently, every 1% decrease in house ownership leads to the need for 1 million new rental properties. 

Both the sets are leaning towards renting more than owing a home with all its responsibilities. Reasons being- 

The elderly class though looking for a home do not want the responsibilities of a property manager. And under this particular requirement, Renting is their resort. At an affordable price, they can fairly own a property and be free from repairing hassles at the same time. 

And as far as the millennials are considered they are majorly focused on their careers and do not show any interest in major settling down life events any soon. This significantly reduces their need to own a house. Also, due to exorbitant student loans, the affordability of owning a house is going down. They are made up to give up a significant sum of their earnings in clearing their former loans, therefore renting suits them better than ownership. 

Real estate is an ever-growing venture but this decade marks baby boomers entering their retirements and the millennials their moving-out period. This indicates a boom in the industry with the demand for stable house owning and rental properties respectively. 

At the end of the spectrum, both the classes look for almost the same characteristics in a locality. Baby boomers would go for a locality with growing opportunities and adequate safety measures and the same goes for the people stepping into adulthood. Job growth and prevailing law conditions backed up with friendly neighborhoods are what they are going for. Under these circumstances investing in classes B and C, shares seem to be the right decision.

Even with the uprising of the COVID-19 pandemic, Multifamily moderately remains to be recession resilient with slight ups and downs in the prevailing markets. Renters, most certainly are experiencing layoffs and furloughs but it is expected to rise again with extensive modifications in no time.  

Despite the posing challenges, there is a Silver Lining for the investors-

  • It is a long-term investment and will not be affected by the short-term crisis.
  • Due to pandemic, interest rates are at a ground-level low, which is a perfect opportunity for maximizing the returns on investments. 
  • Regardless of economic conditions, people are bound to find a place to live in.

The property sector is usually the one to be the most affected by the disproportionalities of the economy. But, on the current property cycle, Multifamily Housing is ahead of any other facility and has been showing the characteristics of a maturing asset class, in terms of appreciation, new opportunities, and wide-spread markets.

Thus, are you ready to step into the contemporary normal?

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prashant kumar

Prashant Kumar, CCIM

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