High interest rates on bank loans are traditionally considered a negative factor for the real estate market, as they increase the cost of borrowed funds. However, even in such conditions, real estate investments can remain attractive due to a number of factors. In this article, we will analyze how high rates affect the market, what strategies investors should choose, and which real estate segments are the most stable in such a situation.
1. The impact of high rates on the real estate market
An increase in the Central Bank's key rate leads to higher prices for mortgages and business loans, which affects demand:
- Decrease in buyer activity - many postpone purchasing housing due to high overpayments on the loan.
- Fall in prices - due to decreased demand, sellers can make concessions, which opens up opportunities for investors.
- Growth in rental demand - those who cannot afford a mortgage often remain in rent, which supports the profitability of investments.
2. Why does real estate remain attractive?
Despite high rates, investing in real estate retains its advantages:
Inflation protection
Real estate is a tangible asset that appreciates over time, especially in high inflation conditions. Rents are also indexed, which ensures capital preservation.
Ability to buy at reduced prices
During periods of high rates, many developers and private sellers reduce prices to speed up sales. This allows investors to purchase properties at a discount.
Stable rental income
Even if sales slow down, the rental market remains active. In some segments (for example, apartments or commercial real estate), yields can even increase.
Diversification of the investment portfolio
Real estate is an asset with a low correlation with the stock market, which makes it a good tool for reducing risks.
3. What strategies work when rates are high?
Buying at a discount
In conditions of low demand, you can negotiate and purchase properties at 10-20% below the market price.
Commercial Real Estate Investments
Offices, warehouses and retail spaces often generate higher income than residential properties and are less sensitive to rates.
Short-term rentals (Airbnb, aparthotels)
If a mortgage is unavailable, demand for rentals increases. Tourist destinations are especially promising.
Redevelopment and renovation
Buying old properties with subsequent modernization can significantly increase their value.
4. Risks and how to minimize them
- Liquidity - with high rates, it is more difficult to sell real estate, so it is important to choose liquid locations.
- Cost of servicing the loan - if the investment is financed by borrowed funds, you need to calculate whether the rent will cover the payments.
- Taxes and regulations - changes in legislation can affect profitability.
High bank rates are not a reason to refuse to invest in real estate, but an opportunity to acquire assets with good growth potential. The key is choosing the right strategy, market analysis and proper risk management. In the long term, real estate remains one of the most reliable ways to preserve and increase capital.
