Real estate is among the most successful investment instruments available to the general public.
As a real estate investor, you’re helping to ensure that more houses get built while you earn healthy returns on investment.
Some self-appointed investment gurus speak of real estate as a “silver bullet” or asset and claim investments in real estate cannot fail. That could not be farther from the truth because many real estate investors lose money because of a lack of knowledge.
Today’s piece will cover core economic indicators that historically predict real estate market performance.
Are you ready to unlock the secrets to real estate success?
Interest Rates
Few indicators are more important to homeowners and real estate investors than interest rates. It doesn’t matter if you use the best trading platform in Australia to earn a living or teach at the best school in the country; everybody pays attention to interest rates before and during the homeownership process.
In Australia, the Reserve Bank of Australia (RBA) is responsible for setting interest rates, and at the time of writing, the RBA set it at 4.35%. The last thing you want is to invest in a home during a favorable interest rate period and discover that your monthly payments have become unaffordable because of interest rate hikes.
Between 1990 and 2004, interest rates in Australia averaged 3.86%, but that does not tell the whole story. In January 1990, the country’s interest rate peaked at 17.5%, and its all-time low of 0.10% was achieved in November 2020.
Interest rates can sway considerably, and they have risen since May 2022, and it doesn’t seem like this will change anytime soon. A savvy real estate investor should closely monitor interest rate changes, gossip, and potential fiscal policy updates.
Gross Domestic Product (GDP)
An economy that constantly fails to achieve growth goals is bound to fall into recession. Poor growth projection figures can dissuade investors from investing.
Still, it’s worse when an economy posts lackluster growth numbers and fails to achieve unimpressive growth figures.
As a real estate investor, the GDP growth rate is one of your most reliable indicators to ascertain whether the economy is ripe for new investments.
It might be time to hunker down and focus on managing your asset portfolio via the best trading platform in Australia. Historical GDP data significantly influences economic health and, by extension, the real estate market.
If you’re interested in backing real estate projects, you should research how well this asset class performed during the US election years and how it has performed recently.
Suppose you’re interested in low-income properties in an up-and-coming city like Hobart; you might decide to wait until the economy enters a depression to snag up assets at significant discounts.
In other cases, investing when the country’s GDP performance is strong might be the best action to take. Whatever you decide to do, there’s no denying that GDP performance is an essential indicator that you must keep an eye on if you plan to succeed as a real estate investor.
Doing diligent research is necessary because you can only decipher what GDP figures are saying when you know what to keep an eye out for.
Unemployment Rates
Unemployment is a significant indicator of economic performance, and as a real estate investor, you need to pay attention to what’s happening in terms of unemployment rates.
Absolute or 100% employment isn’t achievable and should not be the goal of any government, with most countries aiming for a 96% employment rate.
If a country is over-employed, talent competition becomes unsustainable, which can quickly lead to an economic decline.
On the flipside, countries also do not want to deal with excessive unemployment or underemployment, so as a real estate investor, you need to look beyond the surface when making decisions based on unemployment figures.
Real estate investors love unemployment figures because they tell a story about the overall health of an economy. A slight dip in employment in the last two quarters might mean that the construction industry is faltering, which might suggest that interest rate changes are on the horizon.
Invest in Real Estate Like a Pro
As a real estate investor, you’re blessed with a wide variety of data, and it’s up to you to know how to interpret the available data.
Two investors can learn about upcoming interest rate dips and make completely different and opposite decisions based on the same information available to both parties. You want to ensure that you’re listening to what the data suggests.
