We take a look at some of the reasons why investing in property has long been touted as one of the best investments to make for your long-term retirement plan.
The COVID-19 pandemic is the sort of rainy day that we’ve all been told to save and prepare for. Global markets have been continually depressed, with years of economic progress reversed in just a matter of months.
Savings and investments were affected by varying degrees, with one common trend emerging around the world – property markets were less-than proportionately affected for buyers compared to other investment instruments during the same time period.
For older millennials who are just a few years into their employment, it is never too early to start planning for retirement and other long-term savings, as this pandemic and the resulting global market depression has shown us.
We look at the reasons why property investment has served as a stable and reliable element in retirement plans for generations.
Stability of Property as a Long-Term Investment
Property investment is considered to be one of the best products to invest in for long-term stability because it is low-risk and has low volatility. This means that large shocks to financial markets do not typically have a proportionate negative impact on the market in the immediate term, i.e. property prices and value do not fluctuate as much as other more volatile investment products such as stocks and even bonds, since property is not as easily sold and bought.
As such, it makes for a good way for investors to diversify their investment portfolio to maximise their returns in the long-term.
Property is one of the few investment products that appreciate over time. Well-maintained property built by reputable developers typically appreciate substantially in the long-term and sometimes at a higher rate than other retirement assets such as stocks or pensions. The proceeds from the sale of such a property can be reinvested in new property i.e. flipping. This requires careful monitoring of market conditions, depth of knowledge of the property market of the investment location, as well as a large starting capital for the initial investment. If done right, homeowners can make a tidy profit out of its sale, even after counting for inflation, putting it towards further investment or directly into a retirement fund.
Property investors can also earn rental income through long-term and short-rentals. The rental income can be used to purchase other investment products or into a dedicated retirement fund. During your retirement, you can continue to live off that rental income, which will continue to rise due to inflation. However, it is important to have a full picture of how much rental income you will actually be earning after maintenance costs and income tax, especially if you have invested in an overseas property.
While investing in property has many advantages, it can take substantial capital upfront and so, investment decisions should be taken only after thorough research and careful consideration, especially if you are purchasing an overseas property. Another important consideration is the management costs that you will incur – renovation, physical maintenance, searching for tenants etc. Hence, choosing the right property developer who has a comprehensive suite of after-sales services is crucial to minimizing your costs where possible. As with any investment product, you should carefully consider the risks involved before investing in property.
If you’d like to know more about investing in Thai property, get in touch with our agents here.
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