Who is Buying Real Estate Now?

When Most Say Nobody Wants It?

Buying in many of the top-tier global pre-construction resort real estate developments remains strong because of the characteristics of its buyers.  The buyers are often in a position to execute the transaction without a mortgage or any other type of financing so there is no issue with a credit crisis.  In terms of value, the buyers understand that the property they are acquiring is the best real estate in the world, in the finest locations, is unique, and not easily duplicated.  For these and other reasons, sophisticated buyers see the current credit crisis as an opportunity to acquire the finest real estate which will both maintain its value now, and will more quickly appreciate over the longer term. 

Supply and Demand

The theory behind the sophisticated buyer’s purchase now decision, besides the means to execute, when it seems…at least that the media says….very few buyers are comfortable buying anything is reasonable and points back to the age old theory of supply and demand.  Most buyers agree that pre-construction resort real estate offers the best opportunity to acquire the most desired real estate at the lowest possible price because it is being bought pre-sale before the property is actually built, so pricing is typically under-market.  It is also generally agreed that the right pre-construction real estate projects are unique and hard to duplicate due to location, builder, amenities and other criteria.  Thus, this real estate is most likely to be the most desired which goes a long way in making it potentially the most valuable.

So..When is The Right Time to Buy Real Estate?

Assuming the ability to buy exists, the controversy and opinions arise when the question of when to buy surfaces.  In most cases, people are most comfortable moving in herds and with the popular asset class of the time.  This is easy to prove and is seen over and over again in the movement of popular assets class cycles…. debt (i.e. bonds), equities (stock), commodities (i.e. gold), and real estate…..residential, second home, commercial or otherwise.  Buyers of assets looking for create wealth via their investments through capital appreciation and yield seem often more comfortable investing and chasing the middle or end of a positive cycle higher, than strategically positioning in less popular asset classes for the future positive swings.  It must be psychological or have to do directly with one’s perception of risk tolerance.  Many feel most comfortable to invest the way everyone else is…because it is easily justifiable to everyone and themselves….even though by the time many actually “pull the trigger” and invest into the popular asset class, much of the move is over and the “easy money” has already been made.  So in reality, although it is perceived to be less risky to chase visible and popular winners, it is often more risky to do so. 

It has been our experience in working with our clients over time that that the most sophisticated buyers wait to invest their capital into the most high potential, most unique assets when nobody else seems to want them and it is perceived to be the worst time.  It takes mental strength and certain fortitude to act against the grain and to see opportunity and appreciate perspective through chaos, turmoil and “blood in the streets.”  But acting against the grain seems to create the most opportunities for long term gain and prosperity for those willing to move against the herd.