What R/Wallstreet Bets Means for Real Estate
As you may have heard, last weeks were marked by a never before seen phenomenon in the stock market. The economy revolves around the stock market and Reddit managed to invade the Wall Street giants through a strategy planned by users of a subreddit. This was an event of enormous spectacularism, as it shed light on the power of the people and further highlighted the gaps in capitalism.
Reddit’s r/WallStreetBets community grew by more than 1.5 million users in one day to 6 million members total, as newly formed stock market players and meme lovers huddled together to watch the show. According to FrontpageMetrics, an unofficial website that measures the growth of subreddits, r/WallStreetBets grew the most throughout the last weeks, increasing its membership by more than 2 million users. The group started with 4.4 million members.
That figure rose after group members bought shares in bulk from videogame retailer GameStop, causing the price to skyrocket. The company's stock price rose from just over $4 in January to a total of $347.51.
This activity generated huge losses for hedge funds that had just sold their shares - essentially a bet that the stock price would fall. This technique is called short-selling: a technique in which the investor bets that the stock prices of a certain company will fall. (In a normal bet, investors buy a stock with the hope that it will grow).
When short-selling, the investor borrows shares from a lender, say $10 per share. The investor then takes the borrowed shares and sells them for the same price. Once the shares fall, say $1 per share, the investor buys the shares back and returns them to the creditor, pocketing $9 per share.
Consequently, the impact of this short-selling scheme through Game Stop went viral. The international press, together with the power of social media, has led to an impressive number of new “investors” flooding the stock market. However, this event reached far greater importance than its financial impacts - it was the first time that “normal” people have managed to completely manipulate the market, acclaiming it as the “Robin Hood” movement.
By exposing the gaps in capitalism, hedge funds were quick to declare protectionist measures against short selling in order to save them from being the next target. Now, what does this mean for the housing market?
When we talk about investment, two things usually come to mind: the stock market and real estate. It’s true that both have their pros and cons but phenomena such as the invasion of Gamestop’s shares only fueled the volatility associated with the stock market. It’s possible to win a lot but also lose a lot. Although real estate investment can also show some volatility, as we saw recently with the pandemic, it’s important to highlight how much safer and calculated this type of investment is.
The real estate market is not rocket science. With a clinical eye for appreciation and strategic properties – it’s possible to develop a winning model that will translate into highly profitable flips. This applies to any asset class and with any type of budget. The particularity of real estate investment is the ability to calculate risks and plan your investments based on the expected profit.
A very important factor that further cements the potential of this type of investment is the current real estate landscape: today, property appreciation is at an all time high. The demand for real estate is constantly growing, which is a direct consequence of the population increase and the overall improvement in the quality of life. On the contrary, for example, a car - which depreciates - a house is constantly appreciating. That is why investing in real estate is becoming a “no-brainer”. Acquiring strategic properties in city centers or on the outskirts and refurbishing them with a totally new design and added functionality, is a winning model that will translate into high profitability, with minimal risk.
In relation to external factors that can compromise the characteristic stability of this market, it remains the most resilient market of today. Andreia Almeida, Head of Research at Cushman and Wakefield, bases it on the consultant's last market report: with June amounting for a total of € 1,670 million trades in commercial properties (an annual growth of 50% compared to 2019)».
On the other hand, Idealista - the largest and most influential real estate platform in Portugal - points to its record traffic numbers, with 2020 being the best year ever (about 44% higher than the same period in 2019). «Personal contact did not cease to exist, players simply moved to the digital world to continue doing business, exploring and generating new windows of business opportunity there».
At the end of the day, it's a matter of preference, when it comes to where you want to invest your money. The real estate market is our home and our experience tells us that it’s the best way to successfully grow your capital, based on Architecture TOTE SER's 30 years of experience.
Portugal benefits from the positive trend of real estate business. This continued demand is a result of the investors’ preference from different parts of the world, a consequence of globalization and greater visibility of our country.
As so, this continuous search has led investors - who have chosen our country - to settle in, to live and to "work from home". This possibility of being able to work from home, which promotes flexibility, together with the good characteristics of Portugal, offers a unique quality of life.
In terms of investment, this time could not be more favorable. We are talking about a great new opportunity in the real estate sector, which involves the repositioning of the current assets that do not respond to the new demands after the pandemic:
- Larger areas;
- Greater number of rooms for different work spaces, both for children and adults;
- Greater flexibility and functionality in the use of space;
- Greater appreciation of outdoor spaces.
These premises, which Architecture TOTE SER projects were already responding to, today are even more reinforced in their “Living Space” product.
As a result of the wide experience of Architecture TOTE SER, these spaces offer, in addition to the optimization of their functionality / use in the areas of living and working, a consequent optimization in the high return on investment, due to their strong valuation, by obtaining spaces simultaneously very functional, as they always were, and now highly flexible.