We live in an era where markets of all the countries are interconnected. Strong global forces are capable of bringing change in the global economy. A global trend can have a positive, as well as a negative effect on the global markets. Some of the examples of the current global trends are the rise of emerging economies like India and China, rapidly increasing digital technologies, etc. Changing global trends open the gates of new opportunities for countries, businesses, and individuals. But, countries and businesses go fail to chance with the changing trends lay far behind their competitors.
What are the global trends?
Any change in the ongoing situation that affects countries all around the world is known as global trends. These trends play a very important role in deciding the fate of an industry. Real estate is no more an exception. Real estate is known to be the backbone of several countries. As we are stepping into the year 2020, it is time to analyze the ongoing and upcoming trends that might influence the property market.
The year 2019 has shown numerous global events that had directly affected the markets all over the world. Though the economy of China and the US continue growing, the trade war between these countries does leave its mark. Their trade war has resulted in imposing a high tariff on numerous imports, including steel, aluminum, etc. These tariffs have negative effects on the economy, which can further effects the real estate markets all over the world.
Every year some countries move towards prosperity, whereas some struggle to fight ongoing crises. Below we have shared some upcoming and ongoing global trends that would affect the real estate industry in the year 2020.
Global Trends 2020 and their effects on real estate
Markets in the 21st century are ruled by technology. Technology has been one of the major trends that have changed the phase of the real estate industry drastically. Technology advancement is an ongoing process. In the past few years, technology has been one of the major reasons for the growth of this sector that too, on the global level. It has changed the way property business used to be done. Be it construction, marketing, sales, or customer service, technology has made things quite easy for buyers as well as sellers.
It has helped in increasing the construction quality while decreasing the construction time simultaneously. Last week, China built a hospital within10 days to accommodate coronavirus patients.
In 2019, we saw an increasing demand for augmented and virtual reality concepts. This trend is going to be seen in the year 2020 also. This technology allows a person sitting in one country to see and feel the property while sitting in the comfort of their house in another country. Hence, the country which would be able to imbibe the existing or can be ahead of others in terms of technological advancements would be able to ripe more profits as compared to other countries. On the other hand, countries that fail to adapt to these upcoming technological changes would lag at the global level.
U.S. house prices increase
The year 2019 has proved to be quite good for the U.S. economy. An increase in employment and a decrease in interest rates have resulted in a good YoY in several parts of the nation. However, the year 2018 has laid the foundation for this growth. The real estate industry was booming at that time.
However, the year 2020 might not give the same results. As per the Congressional Budget Office this year, the GBP is expected to slow to approximately 2 percent. Also, the Federal Reserve has indicated that the rate of interest will be increased at least twice this year. By the end of 2019, there was not much increase in the personal income; any increase in interest rate can be troublesome news for the U.S. real estate industry. It’s been some time that the interest rates were towards the lower side, so any increase would be no less than a shock for the real estate market.
Many of the major tech cities like New York and San Francisco have already shown a decline in their house prices. Any decline in tech jobs in these cities or in case the real estate market in these areas becomes a housing bubble than be ready to get surprised in the year 2020.
The higher U.S. interest rate would affect the real estate market on a global level.
We all are well aware of what power the $ hold on the world economy. Every time the U.S. brings any change in its financial policies, it not only affects the U.S. citizens, but its effect can be seen in all other countries as well. Many people compare their currency with the dollar to know about the status of their currency in the global markets. Numerous “forex software tools” are available in the market to know the currency exchange rates.
The reason behind this is that many countries around the world have either use the U.S. dollar or they peg their currency to the dollar. For example, there is a country that uses the dollar as a base; hence, if the U.S. increases its interest rate, then the same change would be seen in that country also. As a result, the homeowners will end paying more money as their mortgage repayments. The home loan interest rate plays a vital role in the growth of the real estate industry. Higher the rate of interest, lesser people would be interested in purchasing the property.
The economy of all countries is interconnected. Hence, any change debt or rate of interest in a powerful country like the U.S. has a global effect.
Increasing demand for sustainable properties
Nowadays, because of awareness, people are more interested in buying sustainable and environment-friendly houses. Studies have shown that millennials are more eager to buy sustainable products. The rise in the demand for organic products is a proof for the same. You might not believe it, but the truth is they are even ready to pay extra for these environment-friendly organic products.
The same trend can be seen in the real estate industry. Hence, landlords, property investors, or construction companies have to find ways to meet the demand for sustainable houses.
For sustainable houses, real estate companies need to use eco-friendly construction material. In addition to this, they need to focus more on the use of renewable energy sources like solar heaters, etc. One very simple change that construction companies and landlords are making nowadays to increase their property demand is that they provide an electric car charging point in the garage of their property. This way, they attract a tenant who owns electric cars.
Huge Urban Expansion
More and more people prefer living in urban cities to enjoy the lifestyle and the facilities provided by them. As a result, the builders have to bring changes in their construction so that they can meet the demand of the increasing population in the urban cities. Hence, the availability of amenities like gym, parking space, club, swimming pool, park, security, etc. is becoming a major point of consideration among the buyers.
Besides this, more and more families are interested in buying or renting a property near to their workplace to save time in commuting. Hence, the construction companies also have to build residential areas near or around these urban cities to meet the buyers, or tenants, residential demand.