Some markets, such as those in developed countries with established markets, were expected to see more growth than those of developing nations
Even though 2020 was not expected to be a monumental year for the global real estate scene, the year had a lot of things going for it. The housing demand was expected to continue its growth. The International Monetary Fund (IMF) expected modest growth of around 3.4% for the global housing sector, up from 3% in 2019. However, this growth was not expected all across the board.
Some markets, such as those in developed countries with established markets, were expected to see more growth than those of developing nations where the GDP was on the rise and more and more people involved themselves in real estate investments. In more developed nations, the real estate growth was more focused around offices and, in some cases, industrial. The global commercial real estate investment volume reached an all-time high of $800 billion in 2019, breaking even the pre-2008 recession numbers.
The European market had been experiencing a climate of change in recent years. Political shifts and uncertainty in several nations, rising construction and development costs and environmental issues were major influencers. But despite all of it, the European real estate market was poised to be very active in 2020, according to a survey on emerging trends in real estate by PwC and the Urban Land Institute. The general ease to do business in many European countries, central banks’ decision to cut or maintain lower interest rates, and people’s genuine optimism have been the main draws for investors.
The monetary environment had reinforced real estate’s attraction relative to bonds and equities.According to the aforementioned survey, 75% of the respondents from 22 European countries believed that the interest rate would remain the same or would be reduced even further without negatively impacting inflation.
Central Europe, in particular, has been at the forefront of the real estate growth in comparison to other European regions and this growth was expected to continue in 2020 and beyond.The Czech Republic, Germany and Poland had been seeing a major influx of foreign investors in recent years — chiefly in the office and commercial real estate (CRE) market.But they are not the only ones.
Nordic countries continue to remain very positive in terms of real estate, and according to Matthew Richards, chief executive officer of JLLEMEA, France has been the “real darling of the market right now,” thanks to macro-economic issues. But the European real estate investment scene is less transparent than that of North America, resulting in a less clear picture.
Furthermore, the real estate markets in Europe — as well as those in other regions —were expected to see continuous growth in foreign residential real estate investment as a consequence of Brexit as well as in the hope of attaining “Golden visas.” A weak sterling, a drop in housing prices in the UK, and the promise of a “Post-Brexit bounce” attracted many global investors to the UK’s housing sector. The appeal of residency and citizenship in Europe has also attracted many to buy houses throughout the continent.
Outside Europe, the major appeal lies in growing economies and Southeast Asia. At the forefront of this foreign investment are the US and Chinese citizens who are developing their global assets. In countries where there are restrictions on foreign property ownership, overseas investors using corporations and third-party enterprises to establish a foothold.
The Asian commercial real estate market, in particular, has been on the rise in recent years and 2020 was expected to further that growth.Even with the tension in the region, property prices continued to soar in 2019 with the office sector in the Hong Kong and Japanese markets being the most overpriced. However, that is not stopping investors from pouring into those and other markets in the region.
Most experts agreed that there were clear signs of momentum for the Asia-Pacific region heading into 2020. There were eight cities in the region among the top 30 cities for CRE investment. Singapore has risen to become the most prospective investment market in the entire region. Foreign investment is also on the up and up.According to JLL, 35% of total investment volume in 2020 came from oversees via private equity funds and large-scale transactions.The region also saw a 32% increase in capital flow from the previous year and has a similar expectation for this year as well.
As for the North American real estate market, particularly the United States, it is always the most valuable as well as most volatile in the world. The US market continued to be an investor magnet in 2019 and no change was expected in 2020. Even with the decreasing capital flow in comparison to the Asia-Pacific region, the US real estate market still constituted the lion’s share in global CRE investment. The mortgage rate was reduced to under 4% at the end of the year with a further reduction expected in 2020.
The National Association of Realtors predicted about an 11% increase in new home sales — resulting in a 13-year high. Supply, though, had been expected to dwindle as the year continued. As a result, according to online real estate brokerage firm Redfin, the housing market in 2020 was supposed to be more competitive and see an increase in price by as much as 6% during the first half of the year.
This would have resulted in the continual growth of the rental scene in the US. However, the constant rise in rent is influencing millennials to cut back on other luxuries so they can save up and buy a home. According to economists at Fannie Mae, this may begin a new construction boom and builders will expand production by 10% in 2020, which will continue to increase in the coming years.But the focus for builders would have needed to be on “starter homes” that are affordable for the millennials.
However, all of these were what people and experts expected from 2020 but now may be derailed. The recent coronavirus scenario has put a wrench into all plans and projects. As a result, the future of the global real estate market is still uncertain. And even though real estate is more stable than many other sectors, the future is still unknown.