I'm looking at an apartment in the north of the city that's pretty cheap compared to other properties. The area is developing, there are new projects, and they say it's going to appreciate a lot in the coming years. Is it really worth the risk investing in those kinds of places, or is it too speculative?
The reality is that buying in a developing area is pure speculation, and like all speculation it comes with risk. The problem is that nobody can guarantee those projects will actually get built or that the area will take off like they promise - there are tons of zones that have been "in development" for years without any significant changes. If you're looking at it as a short-term investment to flip, you're betting that others will pay more than you did, which is risky. On the other hand, if you're buying it because you like the area, it fits your budget, and you see yourself living there for the next few years even if it doesn't appreciate, then it makes more sense; but then it stops being a speculative investment and it's just your home.
It's not as black and white as "speculation yes or no" - it really depends on how soon that appreciation is supposed to happen and whether you have the cash to wait it out for years without seeing the value go up. What almost nobody tells you is to actually verify there's real demand in the area right now: talk to local real estate agents, ask how many apartments are selling per month, not just whether there are towers under construction. It's one thing to have nice projects on paper and another thing entirely for people to actually want to live there now. If there are no tenants willing to pay rent while you wait for appreciation, you're stuck with a frozen asset that costs you money to maintain.
A few years ago, some acquaintances of mine bought an apartment in a neighborhood that was "about to explode" according to the sellers. They convinced them with the same old pitch: new projects, a metro that supposedly would arrive, shopping centers. The apartment cost a third of what something similar went for two neighborhoods further south. Well, five years went by and the area did grow, but not the way they expected. It went up, yeah, but only about 15% in that time. Meanwhile, they were paying maintenance, property taxes, and their money was stuck there with no way to touch it. If they'd put that into the more expensive apartment from the start, they'd be in way better shape today.
The problem is you've got two hidden costs that nobody mentions: the money you put in is frozen for years, and even if the neighborhood goes up, your fixed expenses go up too. Plus, the projects they promise sometimes never materialize, or they do but at a snail's pace. A cheap apartment in a developing area can be a good investment if you're buying it to actually live in it (so at least you save on rent) or if you've got enough cash on hand to afford having that money sitting still for several years. But if you're buying purely hoping to sell high in five years, you're betting that everything goes perfect, and in real estate almost nothing ever does.
I'd check hard what concrete projects are actually already underway (not "planned"), I'd talk to people who've lived there for a while to get a real sense of the growth rate, and I'd honestly calculate whether you can sleep easy having that money tied up. If the idea of not being able to touch that cash stresses you out, that cheap apartment isn't for you.
What sellers won't tell you is how long it takes to recover your initial investment when you factor in taxes, maintenance, and the years your money is tied up there! Even if the area appreciates, if five years pass and the apartment goes up 40%, but you've spent 20% on expenses and commissions, your actual profit is way smaller than it looks. Plus, those "new development projects" they mention can take forever to happen or never materialize, while you're stuck with an empty apartment racking up monthly expenses with zero returns.
Can you live several years without seeing that money grow, or do you need it available? Because the key point here is your time horizon, not the potential of the area. I bought a plot of land in a neighborhood that was deserted years ago, betting it would fill up with construction, and it did, but it took almost a decade and in the meantime I paid taxes, utilities, and the money just sat there frozen. The appreciation was real, but if I'd needed liquidity sooner it wouldn't have been a good investment. The people who lose money in these areas generally don't lose because the properties don't appreciate - it's because they can't wait or they can't handle maintaining the property while they're waiting.
It's not really a "yes or no" kind of thing because it depends a lot on your personal situation, but I'll tell you that my family bought an apartment in a similar area about ten years ago and the "guaranteed appreciation" they promised us took almost twice as long as they said 🤷 The area did go up eventually, but meanwhile we were paying taxes, maintenance and utilities without the property value moving at all. If you need the money in the next 5-7 years, don't even bother; if you can really leave the money frozen without a problem and the area has something more than promises (like the municipality has already approved infrastructure projects, not just "talking about" them), then maybe it's worth it.
Don't let yourself get sold on promises from projects that are still just on paper. What most people don't think about is that even if the area does go up in value, the timing is unpredictable - it could happen in 3 years or 10, and meanwhile your money's just sitting there doing nothing. If you need that cash in less than 5 or 6 years, or if you don't have a safety net to cover maintenance costs and condo fees while you wait, that's too much risk. Better ask yourself: am I buying because I think it's a good place to live, or just because I'm betting on flipping it for a profit? If it's the latter, it probably isn't worth it.
The thing is, prices in developing areas go up once projects are ALREADY finished and people actually want to live there, not while they're still under construction. Do you have the cash to hold onto the apartment for several years without being able to sell it quickly if you need the money? Because if the appreciation takes longer than expected or just doesn't happen, you're stuck with an expensive property in an area that's still on the periphery. Ask the seller what happened with those projects from five years ago that were "supposed to skyrocket" in that same sector.
The thing is whether you can afford to have that money tied up for 5, 10 or more years without getting it back. Because even if the area really takes off, growth is almost never linear - there are dead periods where the price stalls or drops, and if you need to sell at the wrong time you lose everything you imagined you'd gain. Before you sign anything, check carefully what infrastructure actually exists right now versus what's just a promise on paper, because "there are new projects coming" they say that everywhere!
Those "new projects" often stay on paper, and meanwhile you're paying mortgage, taxes, and maintenance without seeing a single penny in returns. If you don't have the cash to hold out for 10+ years without touching that money and the neighborhood doesn't actually develop the way they promise, you're stuck with an apartment nobody wants in an area that's still just quiet. Better to invest in something more established where at least you know there's real demand.
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