Property Investment is No Magic Formula – Read on!

The value of money becomes smaller every day! Many books written by gurus of property investment and other experts are aiming to help investors to make a fortune from property investment. It is not hard to see why most top tycoons or multi-millionaires and successful businessman are some how related to property investment. Some always say, follow what the rich people do and you will get rich too. I am totally agreeable about this as long as you are not doing something illegal or bad to others.

Article contributed by:-
CL of Estate123


Demand and Supply

There are also arguments from many management gurus that economy is dead. However, the basic rule of demand and supply still valid, as simple as, if demand is more than supply, price will increase. If supply is more than demand, price will decrease. Why is this important to property investment then? Just look at the population growth on earth today. With the rate of its growth, but with only limited land on earth, I believe that property demand will continue to increase and supply will gradually decrease especially at selected urban areas. On the other hand, bonds, stocks, currency and all businesses will have the opportunity to enjoy unlimited expansion. Unlike property, once it is built and occupied a plot, there will be no room for it to grow anymore.


Inflation

What is inflation then? It happens when demand is more than supply and everyone is chasing after a relative limited thing on earth and it is very normal for inflation to happen year after year. Recently, oil prices surged to records high. Commodities like gold, metals even food are all facing the same fate. This is a classic example of high demand over limited supply. Probably in every decade, in certain years, inflation may be suffered faster due to some other factors like higher economic growth, greater spending power and greater demand on things on earth. All these combination of factors has some-how caused “Asset Revaluation”. This is the period where the increase is more than the normal rate of inflation cycle.

Deflation? It happens when recession in an economy where demand is lower than supply. For some items, prices may be decreased, may be due to factors like increase in human efficiency or improved technology, thus resulting in increase of supply. However, inflation and deflation may happen together sometimes. This is clearly seen recently when oil prices increase and computer equipment becomes cheaper at the same time.


Time

Still no clue? Because of inflation happening every year, there is no way that a property price will drop in the long run. Sometimes your investment may not be profitable but the value of your currency will always becomes smaller and this will some-how result in higher property prices.

What has time got to do with the price of the property then? Everyone is saying that we should look for a good location in order to get the best return of property invested. A good location means higher demand for a similar area and this case may cause inflation rate to become higher. A Bad location may mean lower demand growth across time for that area and this case may result in negative, low appreciation or sometimes no appreciation at all.

The second rule of dumb for better property investment is to invest in properties plan by a reputable property developer. To my personal understanding, I like to explain in this way that a reputable developer will normally have a better development plan, huge resources and better political mileage that can muscle greater demand in a shorter period of time and may positively help greater price appreciation. For this case, asset revaluation is happening faster than other property developer.


Conclusion

Buying a property as an investment is a must, because it helps us to hedge against inflation. If you found a good property, the price of the property will increase. However, if you found a reputable developer and the unique location happens to be a hidden jewel, the price of the property will just grow exponentially and you will enjoy wealth faster than others across time. If you invested in a bad property, you may suffer a period of deflation on the property invested and you may become poorer. But it is not something need to be worried, because across time, the price will definitely recover if you have infinite time to wait. (That normally does not happen because life is short!)

Thus, the idea of buying a property with great demand and allow the value to appreciate across time will generate good wealth for you. But it is not the only formula because, sometimes when you do invest in an average location property, the economic factors will do the rest for you. You will become wealthier too.