Hey you real estate agent on the other side of the screen, welcome to 2019!
We just came out of a economic crisis, but the ULI / PWC Annual reports says that there will be an economic slowdown during 2019. After years of steady growth and low interest rates, many real estate and financial gurus expect a correction, and new opportunities may arise. But what will be the cause?
Technology, demographic changes, and the continued winding-down of traditional retail will fuel that correction. On the other hand, new markets and actors will be coming into the catwalk during 2019.
In Europe, the secure long-term income is driving current European real estate investment, as the industry hedges against potential interest rate rises and an uncertain geopolitical backdrop.
Let's find out what will be the main trends in the U.S. real estate market during 2019.
Fertility and immigration in the USA is decreasing, and as we continue to grow older, our labor force is also being reduced. These factors led us to a slow down on the productivity and smaller improvements on economy.
Congressional Budget Office projections reveal an average GDP growth of 1.9%, between 2018 and 2028, and this value is much slower than at the beginning of the current economic upswing.
Real estate activity will likely slow down in demand. However this slowdown won't be fixed. We will be able to see some variations, across geography and property types. On the other hand new opportunities will also arise. We are talking about emerging markets, replacing older buildings, or new office spaces also sponsored by the labour market change.
Even though being a "digital nomad", with no strings attached, is becoming a really cool thing to do, millennials are way more than that. There is an increasing amount of first-time home buyers among millennials.
Now that the ones in their mid-to-late 30s are growing in their careers, having children, and taking decisions for their future, they start searching for a new house.
In fact, according to NARS, last year in the USA, 30% of millennials purchased homes for $300,000 and higher, and the numbers will continue to grow as the employment is also showing some positive signs, as we can see below.
But you should be aware because these buyers are way more informed than the old consumers. They are relying on real estate professionals not to introduce them to homes. They expect you to show them the neighborhoods, and lifestyle, they will get by the time to move to a certain property. On the other hand, this consumer wants to know what will be the future value on the property, and guidance for the legal process of buying a house.
As they are searching online, having a strong online reputation is going to be fundamental to continue succeeding in your activity.
If you don't have these kind of properties in your selling portfolio, you should be looking for it, or looking for ways to provide customers access to it. Why not establishing contracts with companies that provide laundry service, co-working spaces at a lower price etc? Be creative. Your clients will appreciate that.
This year you will be hearing a lot people talking about technology. This is a sector that is working hand in hand, to bring the best solutions for real estate professionals. The number of startups dedicated to real estate tech will continue to increase and invest on development, especially because the market is becoming more and more competitive. But we should also note that financial tech has a great impact on the sector, as it helps to reduce transaction costs by providing more automated operations.
On the other hand, you have to keep in mind that people are always on their mobile phones. According to Quartz, in the USA, one in five American adults only access the Internet via a smartphone, not a computer. So maybe you should start considering developing an app.
Last but not least, many interviewees in the PWC Report, referred the data revolution behind more sophisticated investment behaviors, as one of the most important transformations in real estate business. Nowadays analytics are more transparent, data is more commoditized and cheaper, and real estate financial markets have become more efficient. All of this is leading us to sharper competition and less “low-hanging fruit” available.
There has been a growing hype about the introduction of AI in the real estate sector. But how will this be introduced? AI can be a powerful partner when it comes to improve building efficiency and safety.
Companies like WeWork, and smart buildings like The Edge (see the video below), are already putting their cards on the table when it comes to analyzing user behavior in their shared office space to redesign the spaces, and to improve their services offer.
[embed]https://www.youtube.com/watch?v=rT81J1FjI_U[/embed]
For sure you already had the feeling of "God, I forgot to buy Carrie's present and her birthday is in 3 days", and then you though "I am buying something quickly online". The customers expectations when buying, and towards the deliver date, pushed logistics business to take a giant leap that might face a few challenges.
There is a need for governments to invest on their transportation structure (roads, airports, trains, etc) to cope with this growth and, even though we know that the world wasn't build in a day, this is something you want to keep an eye on. The development of the transportation network will impact land values and investment opportunities, so don't miss out your chance.
The United States, face a housing crisis. According to PWC Report, 50% of all renters pay more than 30% of their income on housing, and the National Association of Realtors (NARS) claims that since 2015, the combination of rising single-family home prices and pressure on mortgage rates, are responsible for a decrease in its affordability index.
There is an urgent need to build, according to industry researchers, 325,000 houses per year. This amount of units it is feasible due to the available money in the multifamily sector, but we should be careful about the shortfalls in construction workforce.
A vast reckoning will take place in the rental market and both private and public stakeholders need to work closely to rework how rental buildings are funded and delivered.
During 2018 we were present at the RENT PropTech fair in Paris. We gathered with real estate professionals to know who are the new actors coming into the real estate market. Here we present you the 5 new actors that will and are arriving in the sector.
During 2019 we will find:
There are the new actors that you should keep an eye on during 2019. If you want to learn more about them, please learn our article fully dedicated to them.
Obviously every real estate agent is thinking a lot about leads, but we have to admit that we are tired of receiving leads that lead nowhere. We are changing our thinking, and rather than receiving 10000 leads per year, we want to receive quality leads. So we have to focus on how to qualify those leads and how to optimize our time.
This sounds easy, but when we consider the prediction that the market will slow down, we need to bear in mind that the market will be more competitive and we need to be at the forefront and prepare ourselves in advance.
We talked with Byron Burley, our North America-Oceania, and we asked him in his opinion what will be the trends for 2019.
According to him, prices for existing properties in the U.S., Canada, Australia and New Zealand will see a decrease in 2019. This will be due to a number of reasons, most notably, the U.S. and China trade tensions. With the current U.S. administration pressuring other countries around the world and impacting the stability of their local job markets, there is uncertainty that now is the right time to be investing in property. This will also impact the construction sector, and new housing construction will decrease.
On the other hand, the luxury market in Los Angeles will remain hot. With adjustments to pricing, buyers may scoop up luxury properties in key locations that they can hold and sell when the market starts to soar again.
Let's have a look on some key trends in some other markets.
To stay in the forefront of real estate, you must work with a foreign audience. You need to take the best tools available on the market to optimize time (for you and your customers). The use of technology and investment in marketing are essential to boost your business. It is vital to find and communicate quickly with your potential buyers, even if they are based in another country.
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During 2018, lot's of investors rushed into urban centres to buy old apartments and renovate those. This led to the revitalization of smaller USA cities.
During 2019, we expect people to start searching property in the outskirts, especially millennials that will move to 18-hours cities, or walkable cities, with great facilities and lifestyle, and lower acquisition and maintenance costs. Let's have a look on their reasons to move house.
These talented professionals will improve these areas productivity, and will contribute to urban vitality. This conclusion is emphasized by the ULI and PWC report, that states that 18-hour cities, that made the top 20, saw an average of 55% of their new residents locate in the suburbs over the last five years.
On the other hand, as the traditional family structure changes, our needs also change and real estate market adapts by bringing new amenities or services.
Today families want more than gym and pool. They want multifamily developments that include movie theaters, gardens, co-working space and others.