There are strong indications that economic slowdown prevailed all over the globe, but there was no official confirmation about it. Because of the inflation and geo-political instability, more or less similar situation has prevailed. Under such a scenario, is it right to buy a house? Let us weigh various pros and cons before deciding to buy a house. First and foremost, we should ascertain whether there is any scope for economy to become slow down.
This can be verified with the help of unemployment rate, industrial price index, retail sales, non-agriculture employment, GDP and other indices. The GDP of the country has gone down in the first two quarters of 2022. But, the GDP registered an increase in the third quarter. Similarly, the unemployment level has reached the level of pre-Covid-19 situation. The Industrial Price Index remained stagnant since 2022, but it did not register decrease. At the same time, the inflation and go-political instability have been impacting the economy. Because of this, many feel that the threat of economic slowdown is inevitable.
To purchase a house during economic slowdown is beneficial in some respects. Because of lack of demand, the prices of houses will decrease; there will be no competition to grab the bids. The prices of housing units, which once sky-rocketed, will come down. The rally of prices of houses between December 2019 and June 2022 is not stable. During the period, the prices increased by 45 per cent. It was unusual to notice such huge hike in the prices in such a short period. Setting aside the problem of economic slowdown, the house prices have registered a decrease by 2.67 percent during July and October of 2022.
Under the prevailing situation, buying a home will be disadvantageous in some respects. Currently, the mortgage rates of interest are very high, while the minimum wages are found to be very low. The inventory of stocks of houses is also very limited. During the recession period, there will be no job security. It is one of the factors that affects the housing sector. Under such a scenario, the buyers will develop cold feet and adopt wait and watch attitude not willing to invest all their savings.
In case of job loss during recession, paying EMIs would be very difficult. At the same time, the availability of houses for sale in the market will be very less. The developers will also adopt a wait-and-watch attitude till the market conditions improve. All these factors impact availability of the house of buyers’ choice in the market. Whether to buy a house or not in the economic slowdown depends on the individuals and the prevailing conditions in the market.
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