Investing in real estate is as popular as ever despite the ups and downs in the market in recent years. However, the focus is changing. Whether you’re a first-time real estate investor or a financial guru like Cameron Poetzscher You should be aware of the changes on the horizon. Here are six predictions for the real estate market in the short-term future.
The ever-dynamic real estate landscape will generate a number of significant changes in the real estate investment community, highlighted below. Are you ready to take advantage of the emerging opportunities?
- Significant growth – The international offer of real estate assets in which to invest will grow significantly, resulting in a considerable expansion of opportunities, many of which will be in emerging economies. The growth of the world population and the increase of per capita GDP will drive this expansion. PwC predict that real estate assets in which people can invest will have increased by 55%, or more, in comparison to 2012. Subsequently, this asset base will grow at a similar rate over the next decade.
- Risk and profitability – The fastest growing urban areas will present a wide range of opportunities with varying risk and profitability. Cities will offer wide-ranging opportunities from low-risk, low-yield primary real estate assets to high-risk, high-return opportunities in developing economies. There will be the greatest social migration of all time – mainly in emerging economies – which will motivate the greatest growth in construction ever experienced.
- Sustainability and technological innovation – These concepts will be the primary levers. Buildings will have to be “sustainability” certified, and new developments will be “sustainable” in the broadest sense, while providing occupants with pleasant living space. Technology will have a disruptive effect on the economic fundamentals of the real estate sector, causing certain types of assets to become obsolete.
- Collaboration – Government collaboration will be increasingly important. Developers, real estate managers, and the investment community will have to build alliances with public administrations to reduce the risk of their plans being economically unfeasible. In the case of many emerging countries, governments will implement initiatives to develop urban infrastructure and real estate.
- Prime assets – Expect increased competition for prime assets. Wealth recently generated through emerging economies will lead to fiercer competition in the prime asset segment; investors will have to devise transversal approaches in order to achieve attractive returns. To do this, they may have to promote assets in rapidly-growing but riskier emerging economies, or focus on higher growth segments such as agriculture or retirement-related sectors.
- Emerging risks – A wide range of new risks will need to be considered. The risk of climate change, rapid changes in behavior and political risk will be key considerations. In order to prepare for these implications, real estate investors will have to ensure that they possess the appropriate skills and qualities.
The real estate sector, although evolving still offers incredible opportunities for investment, and excellent returns, if approached with a long-term strategy, and an eye on the shifting fundamentals.