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What are the advantages of real estate in times of crisis?

Writer's picture: CARIBEEXPERT - ERWINCARIBEEXPERT - ERWIN

Recessions are an integral part of the economy and just as normal as the upswings that have characterized the global economy in recent years. After positive economic phases, it is understandable that a country's economy can sometimes develop negatively.


Many economic experts see potential for a new economic crisis in the next few years. The arguments for this are often varied and well-founded. In this article, however, we do not follow the classic media and analyze the potential of a coming recession, but instead look at the advantages of real estate investments in times of crisis.


Why do investments lose value during an economic crisis?


In order to understand the effects of a crisis, one must first be clear about what recessions actually are. These are disruptions in the ongoing process of production and/or consumption. Economic crises can affect the entire economy or be related to individual sub-areas. Crises are fundamentally characterized by a strong negative development of economic growth and an often high unemployment rate.


In many cases, excessively critical media reporting intensifies the effects of a crisis on the real economy or even initiates it in the first place. Because a negative economic mood, fear for the job or saved currency amounts reduce the consumption behavior and investment behavior of the consumer. While negative economic growth typically has no immediate impact on investment value, subdued consumer sentiment has very direct implications, often leading to a cycle of economic downturn.


In principle, no investments are completely protected against a drop in value in times of crisis. Stocks, real estate, and commodities all typically fall in value drastically. While many investors value precious metals such as gold and silver as anti-cyclical investments, the real performance often looks different. When investors make losses and face existential problems, they usually withdraw capital from a wide variety of investments. As a result, even investments that were believed to be safe lose massively in value. This also applies to real estate prices, which are falling with economic momentum and the associated availability of loans.


What are the advantages of real estate in times of crisis?


Although real estate prices are not crisis-proof either, real estate is an excellent investment even in times of crisis. The main reason for this is that real estate, unlike many other forms of investment, is a tangible asset that brings a direct, irreplaceable benefit. There is always a need for living space and there is a high probability that it will increase rather than decrease in a crisis.


Since living space in various metropolitan areas is also very scarce despite the high demand, it can be assumed that real estate in the city can be rented well even in a recession. A constant return should therefore be given despite a possible temporary drop in value.


Since living space in various metropolitan areas, including popular tourist centers, is very scarce despite the high demand, it can be assumed that holiday homes and holiday apartments can be rented out well even in a recession. A constant return should therefore be given despite a possible temporary drop in value.

In emergencies, real estate is also suitable for personal use, which offers investors security. So if a real estate investor gets into financial difficulties themselves, they can make use of their living space themselves. Since a property does not lose any substantial value, it offers great benefits regardless of the economy.


Conclusion: What makes real estate investments crisis-proof?


As explained above, real estate can generate solid returns even in times of crisis. However, this presupposes that an investment has been carried out professionally. The location has a very special meaning in the crisis resistance of real estate. Since real estate in good locations and in safe, heavenly countries such as the Dominican Republic is currently relatively highly valued, it can be assumed that these locations will lose value the most in the event of a severe recession.


What is interesting about the real estate industry?


Real estate is also by far the largest real asset class in an economy. Residential real estate offers us protection and security. Modern commercial real estate enables all other sectors to work efficiently


CaribeExpert & Inmobiliaria Bayahibe have the most suitable real estate investments for you, we will help you to find the right solution

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