Taking into Account the Real Estate Market Cyclicality when Making Investment Decisions

Abstract

The study analyzed the patterns of development of the real estate market. We identified two main trends in the development of the market: the trend of increasing the value of real estate in the long term and cyclical changes in prices in the short and medium term. The study described main stages of the development of the real estate market: the stage of «moderate growth», the stage of «boom», the stage of stagnation and the stage of decline. The main factors that cause the occurrence of the listed stages, as well as the negative and positive consequences of each of them, are determined. The cyclic nature of the real estate market is confirmed by the results of the market analysis. In the context of the economic crisis and the decrease in the effectiveness of most investment instruments, identifying ways to increase the economic efficiency of investments is a rather urgent task. The main factors influencing the efficiency of investments in real estate are analyzed. Among these factors, a fairly significant impact on performance indicators is exerted by: the amount of investment, as well as changes in the cost of an acquired or created asset. To increase the efficiency of investments in real estate, one should choose the moment of entering and exiting the market, and also take into account the stage of readiness of the object. Thus, the expediency of using the cyclical nature of the real estate market to improve the efficiency of investments has been revealed. Regular monitoring and analysis of the real estate market is necessary to determine the stage of market development. The study described the features of the analysis of the real estate market, which make it possible to identify the stage of its development, taking into account the specifics of the market: inertia, a mismatch between supply and demand in structure; a large number of «exchange» transactions; a significant share of transactions involving mortgage loans, and a need to take into account adjustments when used in the analysis of offer prices analogue objects. The study proposed ways to improve the efficiency of investments in real estate, taking into account the cyclical nature of the market when using various investment strategies: obtaining rental income and increasing the value of real estate.