Global Property Trends for 2020
With 2020 around the corner, it’s the perfect opportunity to take a step back and evaluate the state of property markets around the world. 2019 has been an eventful year and market performance has been impacted by external factors in countries around the world.
The UK property market, for example, continues to suffer from chronic undersupply, with only 163,000 of the needed 300,000 homes delivered again last year, the deficit continues to grow. As unprecedented levels of foreign investment flood into key regional cores, prices in these key areas are rising against the traditionally popular London market. At the same time, uncertainty continues to drive the direction of the general property market, causing many investors looking for quick-flip returns to adopt a ‘wait-and-see’ approach that has resulted in fewer overall purchases and a weaker Sterling.
Globally, a number of trends are indicating how the market is developing, from technological advancements to changes in the way we invest. As part of our wider 2020 trends forecasting, we’re examining the outlook for several key global property markets as we head into the new year, as well as some of the global property trends that will shape real estate in 2020.
Read the full region-specific trend pieces here:
Below are just some the trends that are shaping the UK market, and impacting foreign investment into the country, which continues to rise from multiple regions despite external market factors.
UK Property Trends
Heading into 2020, one of the main stories within the UK market is the resurgence of the South East. After a modest period of decline over the last five or so years, the capital is finally starting to see the light at the end of the tunnel and the surrounding London Commuter Belt in the South East is set to benefit alongside it.
While regional cities are predicted to continue to see above-average growth over the next three years alongside increased demand and lower mortgage rates, London is set to experience its highest period of growth for two years with price rises of 1%. On the whole, this signifies the start of prices ‘firming up’ across the South of England, welcome news for a region that has seen prices and sales volumes drop in 2018. Interestingly, key regeneration hotspots Bracknell and Slough are expected to outperform this % growth, following the example of regional cores such as Birmingham.
Undersupply and Uncertainty Drive Demand
The two other major themes of the UK market – both in 2019 and heading into 2020 – is uncertainty and residential undersupply. While both of these could be seen as challenges, they also represent prime opportunities to build solid returns and find incredible value.
UK Buy-to-Let (BTL) is worth over £1 trillion and represents the opportunity to invest in a sector with unprecedented potential. Research estimates that UK renters will outnumber homeowners by 2039. For context this represents 125 million households, demonstrating the strength of the BTL market as a whole. It’s this imbalance that is having an impact on the market, highlighting the lack of stock to meet an increasingly growing demand.
When we consider that the private rented sector (PRS) alone is still set to grow by 24% by 2021, meaning one in four will be renting rather than owning, if you own an investment property in an emerging market the potential they offer is incredible, provided you buy the right product.
Regional Cities Continue to Rise
When we speak about the ‘uncertainty’ facing the market, what has been a challenge for many domestic investors has actually favoured many international investors. While many local buyers are still holding fire due to uncertainty, international investors have an ‘easier’ route finding value in UK property when they can leverage exchange rates in more affordable areas.
While some domestic investors are holding off on investing, affordable areas are also continuing to rise against traditionally more expensive markets such as those in London. Birmingham for example has risen by 16% since 2016 and is expected to rise by a further 14% by the end of 2020. The South East is also seeing large gains with both Bracknell and Slough – key locations in the South East and major London Commuter Towns – expected to see property prices rise by 12% and 14.8% respectively.
With uncertainty still affecting London, overseas investors are increasingly choosing emerging regional markets and can find favourable exchange rates while Brexit continues to impact the economy.
Global Property Trends
We’re also witnessing several trends that are set to impact the global market as a whole – from the digitisation of the industry to various changes in attitude towards property development.
Rise of Sustainable Homes
Younger generations are increasingly looking to make more environmentally-conscious investment decisions, especially if they have a major impact on the environment or the local community. In terms of property, this means much more emphasis being placed on sustainability.
According to Nielsen research, 73% of millennials (they attribute the term to those born between 1977 and 1995) are more willing to pay extra for sustainable products. Despite the difficult economic climate, almost three-out-of-four of the 30,000 millennial consumers surveyed around the world are paying more for cruelty-free, sustainable or organic items.
The same theory also applies to property. It would be beneficial for property investors and Buy-to-Let landlords to consider the power that sustainable developments could have in a mature, competitive market.
Sometimes referred to as ‘environmentally sensitive’, ‘sustainable’ or ‘green homes’, these eco-friendly developments typically prioritise eco-friendly materials and renewable energy over traditional measures, ensuring they’re environmentally-friendly without compromising on quality. With the advancement of electric cars, we’re also seeing a number of developments adding electric car charging points into their parking facilities, encouraging ‘cleaner’ tenants in terms of carbon footprint.
On-site residential facilities are also useful for encouraging a sustainable lifestyle, particularly when developments have a gym or similar amenities. Having these amenities on your doorstep reduces the need for travel, thus lowering resident carbon footprints. For example, The Grand Exchange in Bracknell has a workspace, gym and private event space on-site, meaning professionals can feasibly work remotely and reduce the need for a commute.
Proptech Continues to Grow
Across the world, one of the biggest advancements currently occuring in the real estate sector is ‘proptech’. Heading into 2020, proptech remains a huge opportunity, delivering digital transformation in many key aspects of the industry. Although the adoption of the tech has been relatively slow, the emergence of home assistants, resident apps and digital homeselling tools means proptech is now on the verge of a major breakthrough.
According to Nardee Cotterall, Chief Operations Officer at online estate agency PropertyFox, proptech will grow throughout 2020.
“The majority of buyers already start searching for their new home online, and we are anticipating that number to continue growing throughout 2020. “As the value of time increases, with society trying to squeeze every last second out of every day and money increasingly tight in most households, technology that allows sellers and buyers to save time and save money will increase in importance like never before. “We anticipate more and more consumers will turn to nimble online real estate agencies for the efficiency of the process and the attractive fees,” she says.
‘Property technology’ is affecting the entire real estate sector and has some of the highest-potential in terms of scope, especially if the traditionally slow-moving industry can adapt to the fast-moving digital landscape. One of the biggest trends at present is the utilisation of virtual reality (VR) throughout the property sector. VR allows both buyers and tenants to experience the look and feel of an apartment without actually having to be there – especially useful for international investors that want a better idea of the product they’re buying. We’ve recently adapted walkthroughs of The Grand Exchange to virtual reality, allowing people to visit the development from the comfort of their living room.
Huge Urban Expansion
By 2025, it’s expected there will be 37 ‘megacities’ globally, up from 23 today and 12 of which will be considered ‘emerging markets’. By 2050, the urban population will increase by 75% to 6.3 billion, up from 3.6 billion in 2010.
Already we’re seeing cities swelling with demand, as people flock to these urban areas for the amenities and lifestyle they can provide. The rate of construction-based activity will be huge and quickly expand the world’s inventory of institutional-grade real estate. Consider that global construction output is expected to almost double to US$15 trillion by 2025, up from US$8.7 trillion in 2012.
This is changing the way that developers need to think about real estate, whether it’s building vertically or ensuring that residents have access to the amenities that they require. It also shows that property in city-centres will quickly become incredibly competitive if it isn’t already, attracting residents that want career opportunities, nearby amenities or to be at the heart of a bustling city core.
At the same time, developers also need to consider that more and more families are increasingly moving in and around more affordable city-centres, especially for the useful amenities that are often available. These families will often choose larger apartments where they can be near work, reducing the need for a lengthy commute – a growing demographic that could be targeted by investors.
UAE Property Trends 2020
As part of our wider 2020 trends forecasting, we’re examining the outlook for the UK and UAE markets as we head into the new year – from the oversupply of property affecting prices in the country to the rapidly rising population that is contributing to massive demand and how the lack of a state pension in the UAE is enabling demand for UK property. Read the full roundup of UAE Property Trends 2020 here.
Hong Kong Property Trends 2020
We’re examining the outlook for the UK and HK markets as we head into the new year – including how an unstable political situation is affecting the ‘most expensive property market in the world’. Read the full roundup of HK Property Trends 2020 here.
South Africa Property Trends 2020
In South Africa, a fluctuating local economy has created an underperforming investment market. Described as ‘intense economic stress’, 2019 and 2020 are expected to be the year where South African investors look overseas for their next opportunity. Beat the market and read the full roundup of SA Property Trends 2020 here.
India Property Trends 2020
Policy changes in India, high-mortgage rates and the opportunities afforded by positive foreign exchange rates have meant international investors are increasingly looking abroad for a better deal, with the UK market standing out as a prime alternative. Read the full round up of India Property Trends 2020 here.