Question

The philosophy of investing in houses just to flip them because, “House prices were always going to go up,” turned into a major nightmare for the borrowers, the lenders, and the global economy. Although starting to rise, we still have low interest rates and now, a flattening yield curve. Investors, searching for better returns, are jumping into stocks with a resulting boom in stock prices. Are we heading for problems with these investments like what happened with housing? What should be done, if anything, by regulators? By investors?

Answer 1

1.In such a situation, regulators should try to maintain a low rate of interest on housing loans, so that the investors, who are currently not getting good price of houses, can balance their loan interest payment and low value of their house.

2. Investors, on the other hand, who are in the possession of their house should hold it as the price offered for house will be low in the current scenario. And the investors who are willing to invest in house property, should invest now as the investment can be done at low price.

3. Alternatively, investors can provide their house for rent purposes to get fixed return by rent.

4. Investors can invest this rent amount in stocks which are providing good returns, though stocks are subject to market risk.