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5 Trends That Could Derail Urban Redevelopment In 2016

Published on Thursday - November 19, 2015

What emerging trends could derail the current push for urban redevelopment in 2016?

For now, there is still a strong movement focused on filling urban cores, and redeveloping older properties to increase density. This can certainly benefit local government revenues, and luxury developers who are able to squeeze more out of every lot. However, there could be a number of factors at work which could derail some of these projects, or at least weaken their appeal and profitability. Keep these trends in mind when buying and investing for 2016:

1. Suburban Homes: Multiple homebuyer surveys have continued to show that homebuyers prefer the features found in suburban homes, not smaller, dense urban apartments. As more buyers are empowered to act, we could see the impact on transactions.

2. High Property Taxes: While some jurisdictions have been floating alternatives to the traditional annual property tax, those taxes are only skyrocketing in many places. This isn’t a cost that goes into your equity or asset value, or that guarantees better services any longer. Taxes are most expensive in dense urban areas like Chicago and NYC.

3. Lack Of Affordability: Buyers, renters and homeowners are facing a lack of affordability in urban settings. They keep paying more for less. Yet, wages really haven’t been growing much at all, perhaps with the exception of those that support the real estate and tech industries. At some point they have no choice but to move further out, that is if they are going to keep a roof over their heads.

4. Remote Working Trends: Remote working has grown fast, but it is really just getting started. Almost 90 percent of some higher level positions are now outsourced. With the poor customer service delivered by many of those that still have brick and mortar jobs, it shouldn’t be a surprise if many more are quickly replaced either. If you can live and work anywhere, will it really be in the cold inner-city, or will it be in safer, more pleasant suburban neighborhoods where buyers and renters can get a lot more for their money?

5. Easier Lending: Hopes are that mortgage lending will continue to ease in 2016. Equipped with easier to get, high LTV home loans, will buyers want to stay in small urban apartments or buy their dream houses?

Summary

Strong population growth, and trendiness of artsy neighborhoods is good for inner-city real estate. But don’t discount the burbs either, especially if there is any weakness in tech stocks and valuations ahead. Developers and cities want people to believe urban is hot. It just doesn’t really seem to be matching up to what people really want at their core. Where will you buy and invest in 2016?

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