Millennials and real estate investingBy Randell Tiongson on August 7th, 2023
The millennial generation in the Philippines, born between the early 1980s and mid-1990s, finds itself at a crossroads of financial decisions. With the changing landscape of investment opportunities, one question often arises: Should Filipino millennials invest in real estate? As this generation navigates their financial future, it’s important to consider the pros and cons of real estate investment and how it aligns with their unique circumstances and goals.
Pros of Real Estate Investment
Tangible Asset: Real estate offers millennials the chance to invest in a tangible asset – something they can see and touch. Owning property provides a sense of security and ownership that other investment options may lack.
Potential for Appreciation: Historically, real estate in the Philippines has shown the reliability for long-term appreciation. Buying property at the right time and in the right location can lead to significant gains over time.
Rental Income: One can leverage real estate as a source of passive income by renting out their properties. This additional income stream can help supplement their regular earnings and provide financial stability.
Diversification: Real estate adds diversification to an investment portfolio. By spreading their investments across different asset classes, millennials can reduce risk and potentially achieve better returns.
Inflation Hedge: Real estate is often considered a hedge against inflation. As the cost of living rises, rental income and property values may increase, helping investors maintain purchasing power. From experience, real estate values in the Philippines benefits from inflation.
Personal Use: In addition to potential financial gains, millennials can also use their real estate investments for personal purposes, such as a primary or alternate residence.
Cons of Real Estate Investment
High Initial Cost: Real estate investments require a significant upfront investment. Millennials may face challenges in accumulating the necessary funds for down payments, especially in high-demand urban areas.
Liquidity: Real estate is less liquid than some other investment options. Selling a property can take time, making it less suitable for those who may need quick access to cash.
Ongoing Costs: Property ownership comes with ongoing expenses such as maintenance, property taxes, and insurance. There is a need to budget for these costs in addition to their initial investment.
Market Risk: Real estate markets can be cyclical and subject to fluctuations. Economic downturns can impact property values and rental demand, affecting potential returns.
Time and Effort: Managing rental properties or maintaining real estate investments requires time and effort. Millennials with busy lifestyles may find it challenging to balance these responsibilities.
Whether Filipino millennials should invest in real estate depends on their individual financial goals, risk tolerance, and personal circumstances. Real estate can offer tangible benefits such as potential appreciation, rental income, and diversification. However, it also comes with challenges like high upfront costs and ongoing expenses. Millennials should carefully assess their readiness, conduct thorough research, and seek professional advice before making a decision.
Real estate investment can be a valuable addition to a well-rounded financial strategy, but it’s essential for millennials to weigh the pros and cons, align their investment choices with their long-term goals, and ensure they are prepared to take on the responsibilities that come with property ownership.
On a personal note, I wish I bought more real estate during my younger years.
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