The Myths of Real Estate Field

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Even in the year 2014 people have the belief that if they buy apartments and wait for their “lucky day” to come, they will automatically become rich overnight due to a miraculous real estate transaction.

However, the reality begs to differ. Potential investors forget that the real estate market is an active environment and not a passive one.

As a matter of fact, in order for real estate properties for sale to be successfully transacted, like those available on, developers have to operate with a lot of attention, strategy and efficient problem solving. Unfortunately, these aspects are put aside and what the vast majority thinks about real estate still resumes to suppositions.

1.    Paying rent is just money thrown out the window, given the fact that rents are very expensive.

False. First of all, rents have increased on a global level at the same time with incomes, but this is not the case for the prices put on real estate properties for sale. Moreover, the taxes that a property owner has to pay are much more increased than those that involve rent payers.

Therefore, the latter have far more chances of monthly saving considerable amounts of money than their landlords. Let’s take the example of a first-time buyer: the capital owned by a rent payer (his savings are put aside in case of a potential apartment buying) is equivalent to the capital of a landlord (the value of his property) during 22 to 34 years after the transaction.

The rent payers isn’t spending money excessively, he just chooses to have money other than investing money in a property, with the condition that he makes an effort to save money each month.

2.    The real estate market is inactive since the debut of the financial crisis. Therefore, if transactions don’t take place, the prices can’t decrease.

Transactions are always drawn back several months before the decrease of prices. As a matter of fact, the mass of transactions have decreased with 18% in 2012, 5% in 2012 and 8% in 2014.

On the long run, the mass of transactions has always turned out to be an advanced indicator of the true level of the real estate market: the real estate boom of the year 1991 in France was preceded by a decrease in the number of transactions 4 years earlier. In the United States, the premises appeared six years earlier.

3.    The prices on the housing market are presently the lowest since 1965, given the evolution of incomes and the conditions for obtaining a bank credit.

Without being at its lowest rate, the indicator for housing prices, influenced by the loaning capacity, doesn’t show an evident sign of overpricing. However, this means that the actual conditions of obtaining a credit are normal or they are extremely favorable and can’t be durable. If the loan period reduces with 5 years and the bank rate increases with 100 points (1%), we immediately surpass the last two peaks of the loaning capacity.

Therefore, the risk is of exposing oneself to a strong rectification like the one of 1990, the year peak of the price/loaning capacity ratio.

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