Worst Case Scenario

What’s the absolute worst thing that could happen when it comes to RE investments–price-wise?

A colleague asked me what she should tell a client if they thought RE prices were expected to go down. So I came up with a short write-up that tackled how prices continue to be supported and even mentioned how US RE prices fully recovered five years after the world's biggest financial crisis. I followed up with the usual spiel on how RE is a safe inv...then it dawned on me...Japan's asset bubble.

It's been over three decades, and the average property prices in Japan still haven't recovered from their peak in 1991. Well, other reports claim condo prices in Tokyo have finally recovered in 2022 (31 years later). Still, three decades is a long time.

To illustrate this: if you bought a property in Japan in 1991 and the asset bubble burst, that property would have declined in value each year until 2010. By that year, prices had finally bottomed, and the value of your property was 50% of what you purchased it for. After another decade, your property's value is still nowhere near how much you bought it for.