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Trends that will soon impact real estate investors
With the economy going south under the Biden regime, more investors are turning to the real estate market because of its resilience. Yet, to get the most out of the real estate market, investors need to spot trends before they become apparent to everyone. Over the next one to three years, the real estate market is likely to see a lot of changes, from how Realtors do business to how people buy houses. Even rental properties are likely to be affected by these trends.
Following are some trends from the Forbes Real Estate Council that will help investors make the most of their real estate ventures in the coming years.
- Increased demand for more livable space: Due to the pandemic, people want more livable space. With more activities taking place inside the home, homes need to now have space for living, entertainment, career and job work, working out, school, and more.
- A significant shift to agile workplaces: We are seeing a shift to agile and flexible workplaces. Given the uncertainty around the economy and the pandemic, renters are looking for shorter leases and scalable managed spaces. Demand for fully outsourced, customized offices is here to stay. Occupiers will reduce dependence on a single headquartered building, opting for shorter commitments and lower capital expenditure.
- More focus on outdoor amenities: With people spending more time at home, outdoor amenities have never been more important. Homes and buildings near parks have always been in demand, and properties that provide park-like settings give renters greater convenience. More people are flocking to apartments and rental single-family homes that feature amenities such as dog parks, gardening areas, and outdoor theaters.
- More people migrating to the suburbs: Remote work was already growing in popularity before the pandemic. Now, as Covid causes remote workers to make up an even larger share of the workforce, we’ll see the migration away from major cities to more affordable, spacious hubs such as the suburbs. In addition, millennials’ desire to buy or rent single-family residences will remain a growing trend in the real estate market.
- Growing demand for experienced agents: Today, over 50 percent of transactions are facilitated by inexperienced real estate agents. As clients grow more savvy, average will not be enough. People will prefer experienced agents that deliver best-in-class results. Top-performing agents will continue to organize into teams that facilitate a much larger share of total transactions.
- Growing inflation rates and rising interest rates: One trend that will impact all real estate markets over the next one to three years will be the Federal Reserves’ recent decision to allow the nation’s inflation rate to move above their benchmark of two percent for the foreseeable future. This shift in policy will artificially suppress interest rates on real estate debt, which in turn stabilizes and inflates existing asset prices as investors search for yield.
Some industry observers believe that the largest impact on real estate will be created by rising interest rates. There is no way that banks can continue to lend at two percent interest. It’s simply not feasible. At some point, reality will take over and we will go back to more historic interest rates. When that happens, buyers will have a harder time securing financing, and home sales will slow down.
- Heavier taxation for principal residences: Over the next one to three years, some predict that there will be heavier taxation for principal residences. There will likely be a slow and steady increase in the market due to low interest rates, immigration and more job opportunities.
- Growing number of homeowners: Lower interest rates combined with the need for some stability will push more people into homeownership. We are seeing this already, and some expect this trend to continue over the next few years.
- Increase in number of defaults: There is likely going to be an increase in the number of defaults and foreclosures over the next few years due to the pandemic and the economic damage that King Biden are causing. While it’s unlikely that we will see a repeat of the massive wave of foreclosures we saw during the Great Recession, it wouldn’t surprise some to see the number of homes in foreclosure double from where it was prior to Covid.
- Exchange of wealth between ownership: Some observers foresee a large exchange of wealth between ownership, especially in the multi-family sector. There are opportunities for new multi-family investors entering the field, and there was already a shortage of affordable, quality housing. A shift is expected toward enabling developers to build more housing in the suburbs, particularly with two, three, and four-bedroom apartments versus studios and one-bedroom units.
Following are some trends from the Forbes Real Estate Council that will help investors make the most of their real estate ventures in the coming years.
- Increased demand for more livable space: Due to the pandemic, people want more livable space. With more activities taking place inside the home, homes need to now have space for living, entertainment, career and job work, working out, school, and more.
- A significant shift to agile workplaces: We are seeing a shift to agile and flexible workplaces. Given the uncertainty around the economy and the pandemic, renters are looking for shorter leases and scalable managed spaces. Demand for fully outsourced, customized offices is here to stay. Occupiers will reduce dependence on a single headquartered building, opting for shorter commitments and lower capital expenditure.
- More focus on outdoor amenities: With people spending more time at home, outdoor amenities have never been more important. Homes and buildings near parks have always been in demand, and properties that provide park-like settings give renters greater convenience. More people are flocking to apartments and rental single-family homes that feature amenities such as dog parks, gardening areas, and outdoor theaters.
- More people migrating to the suburbs: Remote work was already growing in popularity before the pandemic. Now, as Covid causes remote workers to make up an even larger share of the workforce, we’ll see the migration away from major cities to more affordable, spacious hubs such as the suburbs. In addition, millennials’ desire to buy or rent single-family residences will remain a growing trend in the real estate market.
- Growing demand for experienced agents: Today, over 50 percent of transactions are facilitated by inexperienced real estate agents. As clients grow more savvy, average will not be enough. People will prefer experienced agents that deliver best-in-class results. Top-performing agents will continue to organize into teams that facilitate a much larger share of total transactions.
- Growing inflation rates and rising interest rates: One trend that will impact all real estate markets over the next one to three years will be the Federal Reserves’ recent decision to allow the nation’s inflation rate to move above their benchmark of two percent for the foreseeable future. This shift in policy will artificially suppress interest rates on real estate debt, which in turn stabilizes and inflates existing asset prices as investors search for yield.
Some industry observers believe that the largest impact on real estate will be created by rising interest rates. There is no way that banks can continue to lend at two percent interest. It’s simply not feasible. At some point, reality will take over and we will go back to more historic interest rates. When that happens, buyers will have a harder time securing financing, and home sales will slow down. - Heavier taxation for principal residences: Over the next one to three years, some predict that there will be heavier taxation for principal residences. There will likely be a slow and steady increase in the market due to low interest rates, immigration and more job opportunities.
- Growing number of homeowners: Lower interest rates combined with the need for some stability will push more people into homeownership. We are seeing this already, and some expect this trend to continue over the next few years.
- Increase in number of defaults: There is likely going to be an increase in the number of defaults and foreclosures over the next few years due to the pandemic and the economic damage that King Biden are causing. While it’s unlikely that we will see a repeat of the massive wave of foreclosures we saw during the Great Recession, it wouldn’t surprise some to see the number of homes in foreclosure double from where it was prior to Covid.
- Exchange of wealth between ownership: Some observers foresee a large exchange of wealth between ownership, especially in the multi-family sector. There are opportunities for new multi-family investors entering the field, and there was already a shortage of affordable, quality housing. A shift is expected toward enabling developers to build more housing in the suburbs, particularly with two, three, and four-bedroom apartments versus studios and one-bedroom units.
