Record-breaking: 5 big property trends in 2021
After a bumpy 2020, 2021 is already rewriting the record books. From property prices, to interest rates, to refinancing - no matter which way you look records are being broken. Today we’ll look at why property market sentiment is riding so high.
How quickly things can turn around. Many of the highly-regarded economists at that time were predicting that property prices would plummet due to COVID-19. Now, they’re backtracking a bit.
According to the RBA, house prices could rise 30% over the next three years. The official cash rate remains at record low levels.
Suffice to say, market sentiment is soaring. So let’s take a look at some of the records currently being broken.
The property market is a fast-moving beast, constantly changing and evolving. What will be the big trends in 2021? We have an inkling that there’s going to be a lot of change. Will property prices rise over the next few years? Will we see more investors entering the market? Will there be opportunities for first-time buyers? And what will happen to house prices in major cities such as London, New York and Sydney? For five big trends that will shape the property market in 2021, see this article.
1. The future of the property market in 2021
The property market is going to be very different in 2021. People will be renting in larger numbers than ever before and the cost of housing will be higher than ever before. This is especially true in cities like Dubai and Hong Kong.This time last year, London and New York were experiencing record high property prices, and house prices in Sydney
Will property prices rise?
The rise of other transport alternatives such as electric cars and various shuttles means that many people won’t want to drive to the office. All of this means people will be looking to live closer to where they work, but it’s still not going to be enough to offset the big rise in local costs and the rise in house prices.
In some major cities such as Dubai and Hong Kong house prices are already at a level that buyers can’t afford, but the fastest part of the rise is likely to come in these cities. In London, for example, the average price of a property is already 30% above the 2020 peak. To drive up property prices here you need to be buying luxury properties at the highest end of the market.
Demand will outstrip supply
As house prices have risen faster than incomes, some would say that we are just seeing the beginning of a price bubble. In many countries, this has led to new measures that are meant to cool the market such as foreign buyers restrictions in Australia and Hong Kong, tighter mortgage lending criteria, and more.
In the short term, these kinds of measures are likely to help to slow down the property market, but they won’t create long term equilibrium. If anything, they have just created a vicious cycle where prices continue to rise and people take advantage of this to buy up homes that are then snapped up by investors.
2. What will happen to house prices in major cities?
There’s no easy answer to this question and it’s difficult to predict. But it’s likely that house prices will continue to rise in major Australian cities like Sydney and Melbourne, as the population continues to grow. But with the introduction of foreign investor rules and tighter lending restrictions, we may see a slowdown in house price growth in the coming years.Property experts believe that we will see a greater emphasis by the state governments and regulators to enable more first-time buyers to access capital so that they can purchase a home of their own in the near future. However, if you’re thinking this may spell the end for the expensive property market in Australia, you’d be wrong. For what happens next, I’ve picked my top five trends that you should be tracking to stay ahead of the property market.
This is a hotly debated topic, and no one really knows for sure. For some, it might mean the end for the big multi-million dollar properties. Others believe that they’ll remain a desirable investment irrespective of how many bathrooms, bedrooms and entertainment facilities they contain. There is no doubt that more sustainable methods of creating sustainable homes are in the process of being developed, and we should certainly expect these to become more common in the near future.
While sustainable homes have attracted a lot of attention recently, there’s a significant amount of interest in efficiency and design centres that also reduce the cost of constructing new houses. I expect that more and more these types of areas will pop up both in major western cities, such as Sydney, and in more affordable cities with lower population densities such as Melbourne.
We may see a greater emphasis on sustainability and efficient design across the entire property transaction process from banks to the seller. It might even become the norm to have design data and reports submitted with your property purchase offer. And it may also help to explain why some of the most desirable properties form part of broader investment portfolios with private equity funds, rather than solely be invested in by individual buyers.
3. Will property prices rise over the next few years?
The housing market has gone up quickly in recent years, and many experts predict that property prices will continue to rise over the next few years. Whether you’re looking to purchase a property to live in or to invest in, it makes sense to consider how the property market is likely to change in the next few years.With prices rising so quickly in the past few years it’s easy to get caught up in the speculation of the market, seeing all the upside if you jump in quickly and make your move. This often results in investors missing out on buying low and selling high. If you’re going to start buying valuable property this is probably not the best time to do so.
After watching the price of a house rise on the news for so many years (see image below) it’s important to consider how housing prices will change in the next few years, especially in the crucial market of London.
Before getting into which areas are likely to be the most impacted by the next few housing market trends, there is why you should think about the upcoming trends before investing in a property. This is also an opportunity to see how your investments have performed over the last few years.
When it comes to the level of investment being made in the UK housing market, a huge chunk has been going into the purpose-built residential sector. These units are often of a higher quality and come with the security of a mortgage. While you may not outperform on a ‘buy-low, sell-high’ basis, you can outperform if you build a portfolio around a mix of purpose-built housing and apartment buildings.
Depending on the type of property being purchased these purpose-built units have a variety of different costs ranging from construction costs down to the furniture being given to the resident. It is very common in the UK to pay higher rates of property tax for purpose-built units than for detached houses, as they require a bigger halls to house residents’ living quarters.
4. Will we see more investors entering the market?
Nazarian says we’ll continue to see a lot of investors entering the beauty market. The good news is that more money flowing into the market means more competition and more innovation to make the products better.
Firstly, we’ll likely see a more connected, informed and user-friendly buying experience. This means more education and awareness of the real estate industry, as well as the ideal buyer, buyer persona, to increase our knowledge. And it’s not all about getting the absolute perfect property — you also need to know about the right properties in the right areas to get the highest return.
Secondly, demand for sustainable and vibrant urban communities is at an all-time high, as well as awareness of the urban lifestyle. According to a 2020 survey, a third of all millennials would consider moving back to the city if they could afford it, with that number rising to nearly a quarter for Generation Z.
When it comes to selling an urban property, willing sellers need to take a different approach to turn a potential investment into a reality.
Selling an urban property usually involves significant upgrades and improvements around the property and usually involves a large investment in renovation work. These are expensive to carry out and could be time-consuming and ultimately costly.
Selling an urban property could improve pay rates generally, through what’s essentially a real estate success scenario (which can also lead to housing stock shortages and unrealistic prices for properties near major cities). It also might spark interest from other investors who want our city and area to flourish.
One of the biggest trends we’re likely to see in 2021 is the “comeback” of small and medium-sized landlords. A 2020 report by German Search Industry found that more significant local landlords saw their investment portfolio grow in 2020 than they have previously.
5. Are there opportunities for first-time buyers in 2021?
The year 2021 is likely to see a lot of new homeowners, but will there be enough homes for them to buy? The government estimates that the UK will need to build 300,000 homes each year to keep up with demand. But will that be enough? There are some signs that there might not be enough homes to go around as the UK’s population continues to grow.This may change over the course of the year as the country continues to undergo a massive amount of change. Brexit blows apart the UK’s economic and political map, with many predicting a period of uncertainty, which could affect property sales and consumer confidence. Although the coronavirus pandemic was largely lifted by early 2020, more changes lie ahead. Seeing a significant drop in sales during the second half of the year could affect the property market negatively as the UK searches for new homes.
One thing is certain: although there are going to be opportunities for first-time homebuyers, they won’t be easy to come by. As house prices rise and interest rates rise, many homebuyers will likely feel squeezed and unable to buy a property. Key indicators such as house prices, home satisfaction and economic growth will all be closely watched in 2021 as we see how the property market reacts during the next year.
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