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Is It Better to Buy a Property When the Market Crashes?

by Nathan Zachary

How does it feel when you hear the word “recession” when you are going to buy a property? You shiver because we have recently seen a recession in 2008. It was disastrous for the property market.

Sales reduced, properties were foreclosed and the industry whirled in turmoil. However, if you are clever, you can get a good deal by purchasing a house during a recession. 

The economy went into recession, and property prices dipped with it. It shows a close link between the economy’s performance and house values. We will discuss this in detail but first, let us clarify the recession.

Recession Explained

A recession is defined as successive quarters of negative growth. Usually, the national body of statistics announces a recession only in the 2nd quarter of statistics. The United Arab Emirates has sold 3 billion dollars in high-quality debt due to the fear of recession.

Should You Buy a House in the 2020 Recession?

The finance industry wasn’t responsible for the economy’s recession in 2020. Covid-19 was the main culprit behind it, so there was hope that the economy would rise once we are on top of the pandemic.

We have seen even pros failing to predict the property market crash. Prices skyrocketed in 2020 and 2021, leading to the suspicion of the market crashing down again.

Generally, it’s a good idea to purchase a property during a recession. Landlords are desperately trying to sell their houses, and foreclosures rise, usually decreasing house values and increasing the number of properties available on the market. 

This Recession is Different From the Previous Ones

The 2020 recession isn’t like any other recession, thus each homebuyer will be in a different position of a core financial condition. 

Suppose a buyer belongs to the hospitality industry. Their financial circumstance would be different from someone whose job role allows them to work from home smoothly. 

Only a property buyer will know if their financial condition is suitable to buy a home during a recession. However, we would like to discuss some aspects for you to consider.

Perks of Purchasing Property During a Market Crash

If you search for a freehold property in Ajman, you should consider these factors before deciding to buy or not.

Cheaper House Values

When the economy recesses, inflation, and unemployment hits people taking a toll on their financial conditions. So fewer people are willing to invest in buying a home during those tough times.

Recession compels sellers to decrease listing prices to stay afloat. They are willing to sell their house at a lower price instead of not selling it at all. Also, chances are you find a good home at an auction.

Reduced Mortgage Rates

When the economy goes into recession, UAE’s central bank usually cuts the interest rate to pump up the economy. Banks follow suit and lower their interest rates which involve mortgage rates.

You will have to pay lower over the years for your house. You can save a good amount of money if this happens, depending upon how much the amount is reduced.

Seller Concessions

Sellers and property developers Ajman start giving concessions when the property market crashes. They get worried as their properties reside in the listings for too long.

If you don’t have enough money for closing costs, you can ask the homeowner to pay it as a concession.

Downsides of Buying a Property During A Market Crash

If you have decided after reading the above section to purchase a property when the recession is in full swing, read this before you make the purchase.

No Job Security

When the economy slumps, unemployment, and reductions in salaries follow it. People naturally become anxious because of the fear of cutbacks or elimination.

If you think your employment sector or role is safe, conditions can get worse quickly. 

There are other costs involved other than a mortgage for buying a home. Costs can add up pretty quickly, and you may end up on the verge of foreclosure.

Thus, it’s crucial you first ensure that your job is secure.

Banks hesitate to lend money since they fear homebuyers might not be able to pay in full, leading to the foreclosure — a long legal process.

Title Issues

Amid a recession, the seller of your chosen home can get into heavy debt. Even worse, if they aren’t able to deal with it, they may have to foreclose the property.

In that case, you may face title issues that impact your property purchase. Ask your title company to conduct an in-depth search.

Selling a Property Takes Time Amid a Recession

Most middle-income buyers pay the costs of their new home by selling their existing residence. It could become difficult during a recession. 

Your local market prices may have gone down and you may get a lower price than anticipated. And if you don’t want to sell your property at a lower price, it could take a lot of time to get sold.

Bottom Line

Purchasing a freehold property in Ajman amid recession can turn good — but only for those fortunate buyers whose financial condition stays good.

Mortgage prices can plummet since the central bank will attempt to help the economy get up and running. As the number of qualified buyers and the competition dips, house values may decrease too.


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