In some countries, the global real estate market took a massive hit in 2020 with the onset of the COVID-19 pandemic, and after some major ups and downs in the real estate market in particular, we are finally witnessing sustained economic recovery across the board. Yet this is not the overall view as some states like Florida saw an influx of people leaving New York. Here is what analysts have shared this far:
As COVID-19 restrictions are slowly being lifted and plans to roll out the vaccine on a global scale is on the way, trends in the global real estate market, as well as trends that are region-specific, are becoming all too clear and seemingly inconsequential decisions, like deciding to work from home, have major implications for the real estate market worldwide.
Global real estate trends
It might be difficult to believe, but the nature of how and where people work during the COVID-19 pandemic in 2020 has had major consequences on the global real estate market. As more companies and organizations make arrangements for employees to work from home, and more people decide to move away from major cities into smaller neighbouring towns to live and work, urbanization and the residential housing market in urban areas remains on hold on a global scale. During this COVID-19 reality, people are instead choosing to live and work in more isolated, less-populated areas that surround major cities.
This working from home and urbanization put on hold phenomena has also shifted the investment potential of the major property types. The demand for industrial, warehouse and distribution facilities is said to increase drastically in 2021 as people continue to do most of their shopping online and have it delivered to their door. The demand for commercial or office real estate properties has decreased due to the work from home phenomenon but also because businesses no longer need office properties as employees work from home and business transactions take place remotely. To put it bluntly, the pandemic disrupted the office real estate market worldwide and fueled the demand for industrial, warehouse and distribution facilities.
While trends like urbanization put on hold and the work from home phenomenon are trends that real estate markets are experiencing worldwide, there are trends that are region-specific, which we will also look at below.
Real estate trends for 2021 that are region-specific
Region-specific real estate trends are most of the time influenced by how well a region is able to recover from the pandemic. This is most effectively illustrated by analyzing the real estate markets of Israel, Australia and the U.S., as examples.
Many parts of the world, including Israel and Australia, suffered a massive property crash in 2020 as a result of the COVID-19 pandemic, while surprisingly the U.S. real estate market experienced significant growth during this time.
What could explain this discrepancy? Why would one country’s real estate market suffer more than another? One factor which contributed to the growth of the U.S. real estate market, and set it apart from other countries, was the U.S. federal government’s decision to keep interest rates low which in turn resulted in low mortgage rates. In 2020, while many other countries experienced property crashes, U.S. citizens were able to secure cheap loans which in turn fuelled the demand for property and will consequently cause extensive growth in the U.S. real estate market in 2021.
Alternatively, Israel’s real estate market has currently stagnated since the property crash it experienced in 2020 with no significant growth or development since. Israel’s real estate market is in complete disarray as renters remain unable to pay their rent and homeowners find it difficult to pay their monthly mortgage installments.
However in Australia, while the real estate market is experiencing growth after their property crash of 2020, urbanization is still currently on hold. Australia’s major cities are no longer considered engine rooms of national and global economic activity, all the while regional cities are experiencing accelerated growth as an increasing number of city-dwellers relocate to regional towns and cities.
What about other regions in the world? In the Asia-Pacific region, a resurgence of cross-border investment and competitive deal-making within the region is expected in 2021, while in the Middle East, it is said that investment strategies are leaning toward low-risk assets and income stability for the time being.
What do business experts say?
According to Nagabhushanam “Bobby” Peddi, TRUiC CEO: “The strength and growth of the U.S. real estate market remains a constant opportunity for investors in 2021, along with low interest rates and attractive yields, making it a sound and lucrative opportunity for those interested in entering the U.S. real estate market”. With the U.S. rated as the most stable country for real estate investment, low interest rates and a high possibility of lucrative returns, real estate investments in the U.S. is currently considered as a profitable real estate investing opportunity.