Real Estate Investing

The REAL Issue

The value of global real estate surpassed $300 trillion for the first time. While human history is a story of inequality and competition, a robust industry has been created to help democratize access to real estate property. The advent of finance has helped many middle and low-income people gain access to home ownership.

The emergence of finance, however, also creates wider gap between resourceful players and less savvy common investors. The current real estate investment market is dominated by institution and high-net-worth investors.

There are several factors that contribute to the relatively low participation from retail investors in real estate investment market:

• Accessibility

  The lack of investment access to high growth economies and non-residential property types is a big hurdle to real estate investments for retail investors. Industrial and commercial properties generally provide better growth prospect, especially in emerging economies where funding supply is not as easily available as developed countries.

• Affordability

  The average price to income ratio across 482 major cities in the world is 10.61 times. In Asia, the ratio is even higher at 16.11 times. Retail investors could barely afford housing for own stay, let alone buying for investment.

• Lack of Diversification

  Due to the lack of accessibility and affordable options, investors can hardly diversify their real estate holdings. Investors have to accumulate a huge amount of cash before even beginning their journey of investing. High concentration can be a disaster for retail investors who allocate most of their life savings to a single real estate investment.

• Liquidity

  The lack of liquidity in real estate market is a significant barrier of entry for retail investors. Comparing to equities market where investors can easily dispose their holdings for cash, the low liquidity in real estate market causes many investors who may potentially need the money to turn away from the opportunities.