People started occupying themselves with real estate in biblical times. The first documentation of a real estate transaction is the purchase of the patriarch Abraham of the cave of Machpelah.
Since time immemorial, people have purchased land from each other. If in ancient times the main thing was to own the land in order to grow cattle and crops, today the goal is to transform it into residential areas or office spaces, etc.
One of the only things that will probably never be affected by technological advances is that we will always need a roof over our heads, which makes real estate a crucial part of our everyday lives and will probably also never become irrelevant in the future.
What does this indicate?
A product whose relevance and importance never disappears will probably manage to maintain or increase its value permanently. From a broader perspective, we see a worldwide trend of real estate prices increasing. If 30 years ago prices were X, it is like that today they are X+ a certain percentage. The higher the quality of the area you’re interested in is, the more increased the prices will be.
If we compare places like Tel Aviv or New York, we can see that the prices have grown hundreds or thousands of dollars and are continuing to increase even further.
So, what exactly is the market price? Does the market price embody the future potential of the area in which you are purchasing or is it referring to the value it has on the day of purchase?
Let’s start with the most basic answer. The market price is the price you managed to get and not what your appraiser estimated.
Why do I say this?
Many times, people do not understand how appraisers have estimated the price of their property at a higher price or lower than they expected. After all, the neighbour from below sold the apartment for a different amount. When we check the prices of recent transactions, we do not check the condition of the property because the tax authority cannot tell us if the property was completely renovated or destroyed at the time of purchase.
This may lead you to ask: How can I still get into an investment if I don’t know what price they will offer me?
Here are the two points that have helped me the most to understand the market I’m in:
- – The more you get to know the market, the more insights you’ll get. It’s important to see as many apartments as possible. Compare their prices and check their state. This way, it will be easier for you to understand the deviations in the market.
- – Rentals. The better you know the rental prices, the easier it will be for you to understand the sale prices. Even if you do not sell the apartment for personal use if you know how to produce good numbers you will be able to sell it for investment.
How can you investigate this?
- – Surveys. Ask people who live in the area how much they rent. Upload rental apartments with simulations in the areas you want to buy and see what answers you’ll get.
- – Comparison. Create a comparison between all the apartments on the market for sale with a distance of up to 1 kilometre from the property in question. But without going to other investment areas, because in Thessaloniki for instance, 500 meters can take you to an area with a completely different socioeconomic status. So, if you were to compare the properties of different regions you would have a bad outcome.
- – Get to know the product. Understand the specific product you are looking for and compare it. Size? Level of renovation? Balconies? Elevator? etc.
If you learn to look at the deal in this way you will be able to understand the market prices and make good deals, almost like Abraham’s Father.