Let’s start off with the good news: 2021 probably won’t be as bad as 2020 was, for obvious reasons. However, economically speaking, it’s definitely not going to be smooth sailing either. The world is still pulling itself together after a traumatic year (and that’s an understatement), so recovery from is bound to take a while.
Nevertheless, some sectors of the economy are projected to bounce back on their feet much faster than others, naturally. Let’s focus on one that analysts are not very optimistic about: the real estate market in the United States. When trying to understand why this sector has become unattractive for investors, three main reasons stand out and are important to be familiar with.
1. The Biden administration (what awaits investors)
Joe Biden, America’s 46th president, has only been in office for a week so it’s too soon to tell where his financial compass is going to lead the nation. One thing is for sure, though: His plans are generally to do the exact opposite of his predecessor. His promises during the campaign, along with what we already know about his financial plan for dealing with the pandemic, are just his first step in that direction.
“Joe Biden is adopting a socialist approach, which may be good news for the lower classes of America, but not for investors – especially not in real estate,” told us told us Ofir Bar, a successful investor with over two and a half decades of experience with both real-estate ventures and technology start-up companies in the global and the American market. “For example, Biden plans on taxing long-term capital gains, which is something that definitely changes the whole cost-benefit equation of real estate property and makes you want to consider every future investment twice.”
2. COVID – 19 recovery (better late than never)
It’s been over a year since the first recorded case of Coronavirus in the United States – and we all remember how quickly that had escalated into thousands passing away every day. Despite all of that, and while nations around the world are deep into their recovery plans by now, the U.S. seems to be waking up a bit late.
This probably has to do with the change of governments, and the fact that the Trump administration did not take significant steps to fight the spread of the virus. Be that as it may, the bottom line is that while the U.S. is still trying to figure out its path to wellness, it’s going to be rough over there, financially speaking. With more questions than answers regarding when and how the American economy is set to get back on track, investing over there is not recommended – especially not large sums of money, as real estate investments normally require.
3. Take your business somewhere else
Having said that, a look at other places around the globe will probably yield more attractive possibilities for real estate investments. The main factor to look at today is where the financial situation is already stable enough to promise a clear future for your money on one hand, while governments and economic institutions are still putting in place policies encouraging investments on the other.
“Take a look at the European real estate market today,” added Ofir Bar, “and you’ll understand why maybe you should give America the cold shoulder for now, if you’re into real estate investments. Despite the pandemic hitting hard there, nations are in competition between themselves, with the goal of attracting foreign investments. This means less bureaucracy, comfortable taxation plans, financial aid given to construction companies, etc. While the U.S. is opting for a ‘take from the rich and give to the poor’ approach, Europe is trying to encourage its economy to pick up with investments, governmental and foreign.”
Oh, and one more thing…
All in all, one must remember that the time of writing is January 2021, and a whole lot can change in the next few months. This assessment is relevant considering the economic conditions existing today in the U.S. (and outside of it), which don’t seem so favorable toward real estate investments. However, each case or offer should be examined specifically as well as with the background we’ve given here.