Investing in real estate was a smart way to generate passive income in the past years. Recently, the tide has turned. For a while there was hope that central banks would lower interest rates quickly and that additional regulations wouldn’t materialise, but the opposite has happened. However, that’s no reason for (former) real estate investors to panic, explains Max Weterman of Pearl Capital.
Inflation, high interest rates and tighter regulations have made their mark on the sector. The whims of the real estate market are clearly visible in the Netherlands, says Weterman. “Because of the housing crisis, politicians resort to increasingly drastic measures in the hopes that additional regulation will magically rebalance the market. Increasing interest rates and inflation don’t help either, but they aren’t the bottleneck in this story. The general uncertainty is what destabilises the current real estate market.”
Sustainability
According to Weterman, that uncertainty is a consequence of years of government policy, for example the amalgamation of stricter rules. “Current rules and regulations weren’t exactly put in place to simplify the process of investing in real estate, even if they were created with the best intentions,” he says. “Look at the points system and rules around sustainability, for example. Older properties and those with lower energy ratings lag behind in price, while the value of properties with good energy ratings rose an inordinate amount. At the same time, banks have become more reticent about financing older properties with lower energy ratings – but these are exactly the properties that need enough liquidity to turn them profitable. It’s an example of a bureaucratic catch-22 where banks are no longer on the side of the investor, but rather trying to tick boxes.”
For financing company Pearl Capital, this trend is actually positive. When traditional lenders retreat, space is created for other parties. “And financing is essential to create more housing and make the existing stock more sustainable.”
New possibilities
“For many years, interest rates were low, which made loans for real estate projects relatively cheap and offered modest investors plenty of opportunities to get good returns. But the uncertainty caused by additional regulation in recent years has made banks more cautious when it comes to extending loans. The application process also gets longer and longer. This makes investing in real estate harder. Not only do modest investors have to look for other ways to earn interests, professional entrepreneurs also need new financiers.”
“Financing companies like Pearl Capital connect borrowers and investors with each other and form the missing link between real estate professionals, like developers, and investors. Instead of getting stuck in procedural matters, Pearl Capital effortlessly brings these parties together, which stimulates the real estate market and creates new opportunities.”
According to Weterman, the key is creating certainty for investors. “Pearl Capital sets itself apart with its quick process, a fixed interest rate of 6%, and the security offered by the first registration on the mortgage. Real estate professionals, on the other hand, get confirmation of their loan application within a few days. That way, we create certainty for investors and real estate professionals,” he concludes.
Source: ThinkRich.nl
