As the new year gets underway, we turn our attention to trends that shape the real estate investors landscape. Indeed, it is a good time to reevaluate the investment choices and weigh further steps. After all, real estate investing is always associated with risk and managing and minimizing it paramount to lucrative outcomes. This, however, is no walk in the park: From global economy forecasts to tech developments, there are many factors that leave an imprint on the real estate sector.
Real estate pros always keep an eye on the overall economic growth as a predictor of activity and market outlook, and this year, it will be muted. According to the IMF, the global rate will be 3.4%, which is a downgrade of the original forecast. Many are hoping that if not the year of strong growth, 2017 will be the year of recovery and moderation. It’s argued that price appreciation will slow down to 3.9%, which is lower than previously estimated 4.9%.
Alas, political shocks such as Brexit and U.S. presidential elections have contributed to the shabby climate and raise the level of uncertainty. Moreover, the Federal Reserve has also increased interest rates by 0.25%, which may have a detrimental effect on the stock market. Thus, foreign investors will have to factor in a wide array of elements in order to assess how markets react to sluggish growth and other disturbances.
Roadblocks and pitfalls
The inventory is lower than the last year, and that problem is not going away anytime soon. At the same time, prices continue their upward trend. This will likely continue as long as the supply is tight, and also means that builders have a chance to fill the void in demand and profit. On the other hand, an average buyer should overcome obstacles by being vigilant and utilizing various resources to find the ideal units for sale.
Online listings are gaining traction and pose a preferred method of researching and locating suitable targets. Still, the conditions that inhibit the supply will linger in 2017, which suggest we will see fewer homes and faster-moving markets. Despite this, experts predict that commercial construction will see better days and achieve some positive growth (5%). Also, after a sluggish period, the housing starts might gain steam again. The figures are modest at best, but there is room for cautious optimism.
The aforementioned hindrances have a huge role to play and will make things harder, particularly for first-time buyers. Many of them will face difficulties in financing home purchases. Financial picture looks grim, but people should be able to overcome this predicament by moving to more affordable regions, neighborhoods, and cities. That is not to say these areas will lead the way into the better future: Metropolitan markets in the west still account for a bulk of the activity.
Winds of change
One interesting change in recent years, though, is the advent of new players, who aspire to take central stage. Namely, millennials now constitute the largest segment of the buyer population (33%), and together with the baby boomers, they are seen as a driving force behind market growth. Naturally, with newer generations, come new habits, preferences, and lifestyles.
Consequently, new economic models are changing the rules of the game. Most notably, sharing economy shifts the way people live, work, and commute. Optionality brings forth a new way of thinking, a twist on how a particular space is used. Co-living is the most prominent manifestation of this trend and some companies like WeLive already offer units that blend private living space with communal areas, typically for dining, cooking, and socializing.
On top of the game
The housing market has not done much heavy lifting as of lately, which fits the frayed picture of the overall economic development. Political seismic shifts have only added fuel to the fire, creating a volatile mix for everyone. These developments may impact some markets and investors more than others, but in a sense, we’re in the same boat, wandering the restless global ocean. One must keep the fingers on the pulse of economic indicators and stay on top of the latest trends to come up roses.
About the author: Lana Hawkins is the editor of SmoothDecorator.com