Nick Millican’s Insight on Real Estate Economic Crises
Real estate agent Nick Millican talks about the UK´s current housing trends. Because of the current economic crisis, one in four London residents cannot afford to pay mortgage or rent for their home. Some are opting to forego renovation as a cost-saving decision. Others are renting out a room as an additional source of income to help manage their daily needs.
Extreme inflation and a high consumer index may ultimately lead to low property occupation. This is because, among four renters, one admits to being unable to save up enough deposit to acquire a home. As Nick Millican informs, reduced demand for property can cause extra negative pressure on the real estate industry, and investors may make significant losses.
These struggles in residential real estate are no different from those in commercial properties. However, Nick Millican believes that over the long term, the market will stabilize because of the mean reversion.
Understanding Mean Reversion
Most housing and estate market analysts are focused on short-term forecasts and predict a further decline in the real estate market. However, taking the long-term approach, Nick Millican predicts that, while it may take some time, the future is bright for commercial real estate. While the economy is not growing rapidly, there have been positive improvements, as seen by the three-year curve since 2020.
This means that in the coming years, businesses will still grow and need office spaces. Based on the mean reversion theory, Nick Millican says commercial real estate will always grow. This is because the prices of assets will always return to their long-term average value, especially if they are, at one point, below their correct price. Despite the high confidence in real estate’s growth, Nick admits there may be challenges, and it may take some time before the industry picks pace.