What is real estate?
Real estate is a fundamental property consisting of land and improvements, including buildings, fixtures, roads, structures, and utility systems.
Types of Real Estate:
Critical advantages of investing in real estate:
Competitive returns:
Returns offered by the real estate market are very high compared to the returns on investment in bonds and stocks.
In addition to getting the benefit of annual appreciation, the passive income generated by the property can be invested in the family or more properties to get more benefits.
Stable income:
Real estate investments rely more on rental income, and therefore, these are less volatile investments.
Income from real estate investments is stable as it does not change significantly with changes in market conditions.
Portfolio diversification:
Diversifying a financial portfolio provides financial security. We can reduce risks and portfolio volatility by adding real estate investment to the investment portfolio.
Tax advantages:
Self-employment tax is not charged on the cash flow received from rentals. Apart from this, depreciation on assets under real estate is a tax-deductible expense.
Hedge against inflation:
Real estate is an intangible asset and a hedge against inflation. When the economy grows, the value of real estate increases, such as rents increase over time.
Real estate is a naturally limited commodity in supply, giving it an inherent, intrinsic value that serves a basic need.
Disadvantages of investing in real estate:
Transaction costs associated with purchasing real estate investment are considerably high, which reduces profit.
Real estate investments have very low liquidity, which means it is difficult to convert such assets into cash quickly.
Management and maintenance costs associated with properties are high and such costs can increase if the property is set to idle for an extended period.
If an investor with rental property deals with volatile economies, he/she may have to face loss.
Real estate transactions consume considerable time and effort to complete.
Global Real estate Growth rate:
According to the Global Real Estate Market Report, 2021, the global real estate market is expected to grow from $2687.
Thirty-five billion in 2020 to $2774. Forty-five billion in 2021 at a compound annual growth rate (CAGR) of 3. 2%.
Investment in Real Estate vs. Stocks
Forecast- Global Real Estate Market (2021-2025):
Global real estate universe in comparison:
Global distribution of real estate value versus population:
Value of listed real estate market worldwide in 2020, by region
Source: Statista
Asia Pacific accounts for the largest share of listed real estate market worldwide.