With 2020 finally coming to an end, we find ourselves looking a bit more optimistic towards the future. It has been a chaotic year for the real estate market to say the least.
For 2021, I am a bit more hopeful regarding certain sectors of real estate, however in my opinion the actual numbers won’t change much. In this first blog, I will tackle the situation in the United States and Europe and then expand to Asia and the GCC in other segments.
Due to high demand and low housing inventory, the 2021 housing real estate market will favor sellers for the most part. With the ongoing Covid-19 pandemic, we have seen people running away from infected urban crowded cities towards more rural regions. I don’t expect this trend to end anytime soon because most companies have been cutting costs from paying enormous amounts of rent in busy and trendy districts. For their part, employees are no longer commuting to work, they are saving on baby sitter time for their kids and they are fully embracing the working from home movement. So yes, people do want to buy bigger homes away from the city especially in the United States. However, this housing market has already been running too short of previously owned homes. Both the inventory of homes and mortgage rates are now at their historic lows. Mostly to blame, is the rise in remote work which has sparked a new suburban boom and the scarcity of developed land means that builders could be unable to meet the rising demand in 2021 due to all of the previous lockdowns and restrictions.
Meanwhile, Europe has been luckier in 2020 as foreign investors pulled through and saved the old continent as they especially invested in the housing sector which led their numbers to stabilize throughout the year. You can also add to that the ultra-low interest rates, which were due to government support limiting the loss of income for households affected by the pandemic.
However, things might change in 2021. As predicted by the EU, unemployment will rise to 8.6% in 2021, so 2% higher than the year before and this will automatically affect the housing purchasing power of most families. This will push them to either move to apartments with lower rent or stop paying their mortgage or even sell their lands or houses to a much lesser profit. In my opinion, these factors might affect the European real estate housing market which is considered quite overvalued by some experts. Nonetheless, as the pandemic subsides and the European economies gradually recover, there is also a greater chance that (most) housing markets in the EU will return to positive price developments from 2022 onwards.
If I have learned anything in 2020, it is that I shouldn’t have any expectations and predictions, as the year that passed threw out all of our plans and made us all rethink and adjust our work strategies. In 2021, things are a bit clearer as we navigate in not so murky waters and step by step I am sure that the real estate sector will stand back on its feet.