Real Estate Economy is Local

In today global capitalism economy structure, virtual everything is available to global market 24-7. One side of the world market closing is another side of market opening. American Stock exchange will direct impact the economy sentiment of it eastern nation counter part. Isolation of economy downturn has since become obsolete after berlin wall crushed down on 1989. Today, as long as your portfolio are in financial derivative, you vulnerable to any global economy incident.

However, Real Estate investing, aka property investing is very different from other financial apparatus investing. Even though, there many paper derivative of property investing such as reit or mutual fund or public company; still such portion of investing scheme are not comparable to stock market or commodities derivative exchanges.

First, Real estate as refer to it term itself, is an estate, therefore are local. Real estate value are mainly driven by local market sentiment or it local supply and demand aka population. Local population is what really make a piece of real estate valuable or otherwise. A healthy demography which has a lot of young people who eventually translate into home buyer will drive the market up. While a aging demography where older population selling off homes with no enough young home buyer to absorb the supply will drive the market down.

Second, local political stability is very important to have your land valuable or desirable. Regardless how global market is booming, if your piece of land is situated at country where it is not very desire to live in, your property is worthless. Property only as good as the safety, comfortability, conveniency and shelter quality it could provide. Regardless you bough to live in or rented out, is about livability.

Third, infrastructure and tenancy quality of the neighborhood. A home is nothing but a home. The value is driven by the neighborhood quality it could provide. Buying a home is buying its neighborhood. Imagine regardless how luxury your unit you bought with, but your unit is situated in the middle of slump. It make your property worthless as it is to your vicinity. As equal, if you bought a luxury vacation villa, but there is no access to it, your home is worthless.

Finally, investing real estate are almost restricted by it own government regulation and policies. All government tend to have control over it property supply and demand to secure it own political interests. making your own country home unaffordable to your own people, tend to make your citizen quality bad. A country only as good as its citizen itself. Therefore, all socially stable country, always impose certain restriction on how foreigner can own the local property. Politician understood that, foreigner are just foreigner. They are not staying here, therefore , houses here has no sentimental value to them. Any Short term property market down turn will bring down the whole property market if major percentage of property is owned by foreigner. It is the concept that make stock market vulnerable, because it is easily accessible by global investor.  However, as long most of the property is owned by local healthy population, regardless economy condition, as long people are staying here, they are unlikely to push the panic button to sell off. And local people will keep the property occupied which is to avoid high vacancy that drive a neighborhood into a ghost town. Therefore, a good government property investing policies very important to make it property market vibrant and healthy.