Residential real estate is coming back to earth, but will remain strong


Residential real estate markets in the United States and abroad may calm down from the frenetic pace of pandemic buying, but buyers who expect significant downturns or price drops should not hold their breath, panelists from experts on the first day of Mansion Global’s Luxury Real Estate Conference Tuesday.

“The major residential markets in cities around the world have had the best first half since 2016,” said Paul Tostevin, director of Savills World Research. “Seventy percent of the cities monitored saw positive growth in the first half of this year. “

In cities as well as in suburban and rural markets, the aftershocks of a wild 2020 are still very much felt.

Click to view or join the live discussions at the 2021 Luxury Real Estate Conference

“To call this year an unusual year would be a major understatement,” said Danielle Hale, chief economist, “In 2020 the housing market got off to a good start, then the pandemic put it on hold for a few months, although we never saw house prices drop, only flatten out. Then, as the economy reopened, housing markets came back to life and prices rose at double-digit rates. “

(Mansion Global is owned by Dow Jones. Dow Jones and are both owned by News Corp.)

While 2021 has so far been spared the wild ups and downs of the previous year, we are still in the midst of an unusual market. As activity begins to normalize after the chaos of the past 18 months, here’s some information on what to expect at Tuesday’s residential real estate roundtables:

Following: UK sellers to take advantage of strong market before house price growth cools

Cities were never dead

While major cities – especially those heavily dependent on foreign investment – have unquestionably been hit by the pandemic, some are already rebounding stronger than ever.

“You really can’t go wrong with [investing in] New York, ”said Vasiliki Yiannoulis-Riva, partner of Withersworldwide. “Even in an event like the pandemic where the market has corrected a bit, demand has skyrocketed, it’s through the roof.”

Likewise, in London, transaction volumes for properties above £ 5million (US $ 6.7million) increased 61% year-on-year, Tostevin said.

Following: As schools and offices reopen, New Yorkers consider second homes with shorter city trips

Meanwhile, small towns have also seen a large influx of buyers seeking lower house prices and more space, while prioritizing access to urban cultural amenities and a shorter commute to the office.

“Small towns have become places that can offer these things very well,” Tostevin said. “They make it easier to get to the office when needed, with cheaper accommodation. We have seen that this translates into an increase in prices.

For this reason, Ms. Yiannoulis-Riva said she is currently directing investors to “places like Nashville, Austin [Texas], Atlanta, cities that foreign investors don’t tend to think about, but are promising and dynamic because people are moving there for a better quality of life.

Following: As Bid Wars Slow Down, US Buyers Can Seize Some Bargaining Power

Markets can normalize, but don’t call it a burst of bubbles

The meteoric growth of the past year has inevitably raised fears of a possible bubble. While the pace of growth seen at the height of the pandemic buying frenzy is unlikely to continue, experts do not predict a sharp drop in values ​​either.

“We expect to see double-digit price growth to continue through 2021 and into 2022,” said Molly Boesel, senior economist, CoreLogic. “There is a really scarce supply and a really high demand. Later in 2022, we expect price growth to slow to an annual growth rate of around 2-3%.

Ms Hale added: “The housing market has gone from frantic to just plain hot, that’s how I would describe what happened over the past year.

Following: Potential buyers expected to join the fray this fall in these hot US markets

Rather than the speculation that fueled the price hike before the 2007 real estate crash, “right now we’re seeing fundamentals driving price appreciation,” said George Ratiu, senior economist and director, Economic Research, Realtor. com. “Huge demand, insufficient supply, a decade of under-construction. “

In addition to the general chronic lack of supply, millennial buyers have entered the market with force, a trend that shows no signs of slowing down.

“In five or six years, 25 to 30 million millennials will be 30 years old [and entering the sales market]Mr. Ratiu said. “The manufacturers are barely keeping pace, so we will have this dynamic with us in the short and medium term. “

Foreign investors take action

There is a significant difference between the market in 2020 and 2021 and 2022: As travel restrictions ease around the world, international investors are expected to step back and return to the market.

“During the pandemic, we hadn’t seen a lot of incoming investment in US real estate,” Ms. Yiannoulis-Riva said. “As the restrictions are lifted, we’re going to see that come back in a very big way. “

In the meantime, investors from the United States and Canada have become a force in foreign markets, often driven by interest in visa and citizenship programs.

“One thing we have noticed throughout the pandemic is the emergence of significant demand from first tier countries like the United States and Canada who are now asking [visa] programs, ”said Dominic Volek, Private Clients Group Leader, Henley & Partners.

Following: Roadmap for Navigating the Luxury Real Estate Markets in the Fall

And for luxury buyers, the trend towards “co-primary” residences could take their research beyond the suburbs and into overseas markets.

“Suddenly being in a second home for several months became more viable, and it opened up a lot of destinations,” Tostevin said. “We are seeing a return of international demand towards rural and coastal France, for example, and a lot of interest from the United States in Italian regions like Tuscany.”

Space and lifestyle amenities prevail

As tenants, buyers and investors eager to shed the pandemic and return to some semblance of normalcy, their priorities that have taken center stage over the past year are not going away anytime soon. .

“Look for buyers and tenants to continue to want more space,” Ms. Boesel said. “With hybrid work, the home office could become a permanent feature of the home. “

In the new developments, residents who spend more time at home make more use of amenities, said Gabriel York, Lodha co-CEO, and focus on health, outdoor spaces and community access.

Following: Potential buyers expected to join the fray this fall in these hot US markets

“Going forward, when it comes to key drivers of the housing market, well-being is extremely important,” said Jeff Tisdall, senior vice president of development, Residential & Extended Stay, Accor. “We see amenities that meet the market’s needs for community engagement, providing a flexible multi-purpose space that can be configured for everything from events to private lessons. “

Rather than feeling isolated in their ivory towers, buyers of luxury developments are now looking for a healthy, community experience.

“The world has become more homogeneous and more focused on integration between public and private, between buildings and neighborhoods,” said Eran Chen, Founder and Executive Director of ODA. “Beyond top quality when it comes to things like outdoor space and natural light, [buyers are looking for] a new type of community living in apartment buildings, where they can move from apartments to collective places. It will radically change the way buildings are designed. “


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