Despite a lack of a sense of security the real estate market has been performing particularly well this year. The recent Brexit aftermath and the United States presidential election have made predictions difficult to forecast. Regardless of all of this, the United States has continued to prove to be solid for investing based on the positive activity that we have seen. The Urban Land Institute’s annual Emerging Trends in Real Estate Report was recently released and shows a more favorable outlook compared to other global locations.
Below is a list of the subjects that analysts from both PriceWaterhouseCoopers and the Urban Land Institute state that will help shape the real estate market in the upcoming years.
A gentler market
After having recovered from a time of economic downturn we have now entered into a calm from the storm. This cycle has reached a mature phase with signs showing it will remain level. GDP is at a low but steady 2% per year so the Federal Reserve will probably not want to raise interest rates on a drastic level. Financing can still be challenging for construction which has led to signs of a possible decrease in development. This stage can be stressful in the economic cycle for developers where anticipation for a bigger slowdown increases.
Developers are planning their projects to be more of multi-use for flexibility. As one investor states “Jobs are no longer careers, and millennials are not yet looking for the commitment of owning a home. They are footloose in the job market, and footloose as to roots in the community.”
Transformation of location
Particularly in select urban locations, the “live/work/play” angle has been common where it gives back to the community. Developments in downtown areas are helping feed economy by providing growth opportunities in underdeveloped neighborhoods.
The entrepreneur developer
ULI researchers shared that it is a prime time for experimentation and growth for these entrepreneur developers. Where they don’t have the higher profit expectations of the large firms, these smaller companies may afford the opportunity to break into underdeveloped areas as they can sometimes be more flexible in their approach.
The combination of retirement, a clampdown on immigration and a void of project managers has caused for a shortage of skilled laborers. With strong demand and shortage of supply costs have risen which has forced many developers to build high end product to recapture their expenses.
Housing markets across the United States for middle-income households are becoming “housing stressed.” Prices of homes are increasing at a faster pace than incomes while homebuilders are not adding any mid-priced options. Population growth, land and construction expenses as well as wages not increasing as quickly suggests that this problem will not be going away soon. Select cities are considering zoning policies as well as rent control options to help address these issues.
Barriers of entry
Urban development and walkability has made for some income inequality in cities. The report suggests “exclusionary forces are equally alive in suburbs and cities.” This cycle stems first from cities and now has carried out to the suburbs. Demands are on the rise particularly among millennials for things like walkability, transit as well as density. In particular, inclusivity rather than exclusivity is outweighing as a desirable selling point.
Tech savvy cities
Technology is also playing a vital part in the popularity of cities. Things like increasing energy efficiency, building operations and offering technology like networked transportation and online parking availability all are highly desired options. The end result can make cities be more attractive to investors while offering more jobs at the same time.
Virtual reality is becoming more and more a popular part of the marketing process when selling real estate. The technology provides an element of reality before an actual product is delivered. This technology could also become a part of the construction industry as well. Analysts feel that there could be $2.6 billion in real estate applications by the year 2025.
Blockchain, the encrypted digital data technology behind Bitcoin, the virtual currency, could possibly be a potential solution for banks. The technology provides a high level of security. Depending on how it catches on, it could potentially become a part of real estate transactions.