- The COVID-19 vaccine bodes well for real estate investment confidence.
- The US real estate market remains strong with an increase from 2019.
- Australia and Israel experienced housing market crashes, but there is still some optimism expressed by experts.
- Cities are struggling more than outlying areas – especially in London vs. north-west England.
Despite the effects of the pandemic, the development and dissemination of the vaccine bodes well for a swift economic recovery in 2021. Strong economies around the world are on the brink of an enduring economic recovery and this has a global impact on real estate investor confidence. TRUiC analysts have compiled a real estate investment guide and also pointed out some of the facts below:
Global Real Estate Statistics
According to a report by The Business Research Company, the global real estate market is projected to reach $2774.5 billion in 2021 from $2687.5 billion in 2020. This speaks to a CAGR (compound annual growth rate) of 3%. Furthermore, it is expected that by 2025, the market will reach $3717.3 billion at a CAGR at 8%.
This growth is concurrent to the forecasted economic growth in developed and developing nations, as predicted by the International Monetary Fund (IMF) which projects that the global real GDP (gross domestic product) growth will be 3% from 2021 to 2023. Oxford Economics, in fact, predicts that global GDP in 2021 will be the fastest in 40 years even though that will only even it out to pre-pandemic and pre-economic crisis levels.
In an effort to support economies, numerous strong countries have implemented very low interest rates and quantitative easing programmes. This will have a positive impact on the real estate investment market in 2021.
Even though there is a lot of hesitation regarding real estate investment in the short term, the long-term benefits of the market remain strong. The fourth quarter of 2020 saw more than 1,000 funds in the market; this number is double what it was in January 2016, as reported by Preqin.
Area by Area Analysis
Despite the strong growth seen in the US, Australia and Israel have experienced property crashes. London also saw high-end prices dropping, however, elsewhere in the UK prices are still rising.
The State of Real Estate in the United States
As per a report by Zillow, 5.64 million homes were sold in the United States in 2020 which accounts for a 5.6% increase from 2019. By all accounts, house prices are rising and economists are positive that this past-faced growth will extend into 2021. According to Luigi Wewege, a banking executive, the number of people still approaching offshore banks for domestic property loans in the US remains substantial.
Housing Market in Australia
In early 2021, house prices are projected to drop because of the reemergence of strict coronavirus lockdowns in response to increasing infection numbers. According to Tim Lawless, the research director of property data group CoreLogic, it is expected that house prices will decrease in the beginning of 2021 because buyers are worried about what restrictions may be implemented.
Purchasing a property is a decision that requires long-term commitment, but requires a certain amount of confidence in the buyer that they will be able to afford their mortgage in the future. However, with job insecurity rising as the pandemic affects more and more sectors in severe ways, there are many who are worried about being able to afford required household expenses and the mortgage should job cuts hit closer to home.
Real Estate in Israel
The housing market in Israel suffered a significant blow as a consequence of the pandemic. According to reports by the Finance Ministry, purchases in 2020 plunged to levels which were the lowest in two decades with a 27% drop in apartment purchases from the same period in 2019.
As has been noted in many real estate markets across the world, there has been a shift in purchase preferences. High-end locations tended to face the worst of the crisis. This is a trend which emerged in the US as well where cities struggle more than rural areas. In accordance with this, outlying areas in Israel did not struggle as much as their city counterparts, and some even recorded increased sales.
London vs. the rest of the UK
Savills reports that they expect a mere 1% rise in price in London in 2022, however, in the north-west of England, the prices could rise to 6% in the same year. A five-year forecast released by the company projects that the north-west will see the most growth with a potential 27.3% gain. London, however, only stands at 12.7% in the same timeframe.
The type of property that is attracting buyers has changed immensely because of the pandemic. Populated areas are losing prospective buyers whereas isolated homes, and especially detached properties, are gaining traction.
Final take
According to Nagabhushanam “Bobby” Peddi, TRUiC CEO, “Despite the turbulence of 2020, real estate investing remains a safe and trusted option for those who are looking for long-term investment opportunities. Even though housing preferences have shifted, there is still ample opportunity for buyers to ascertain the nature of their local real estate market and purchase a property that offers attractive returns on investment.”
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