Now that we are officially into the second quarter of 2014, many investors are starting to question the actual direction of the market. The industry, as a whole, appears to be heading in the right direction, but those who can’t decipher the real estate trends are left wondering what will happen next. Subsequently, what has the market experienced lately? What trends have begun to surface as we enter into the second quarter? More importantly, how can investors take advantage of them?
Everyone had their two cents to toss to the media in December. Now, the data is coming out from the first quarter of 2014 and new emerging real estate trends are being cited for the rest of the year. So what is happening now, and where do the best investment opportunities lay?
So far, the numbers show housing market performance bucking forecasts in 2014 with the recovery marching on. Some predict steadier growth during the second half of 2014 – after the wild rush to scoop up distressed property deals. However, historical data suggests momentum will only build as we move into a new boom era.
According to a lengthy emerging trends report from PwC and the Urban Land Institute, Canadians have continued to be the biggest investors in U.S. property. What some may consider odd is that in the commercial arena, Canadian money has been overwhelmingly flowing into the office sector.
There has been a lot of buzz about Asian investors in the U.S. over the last couple of years, especially in the California real estate market. However, when looking at global trends, we may not have even seen the tip of the iceberg. Hong Kong, which has long been the haven of Asian and expat investment, is now experiencing its own bubble. Forecasts are for Hong Kong property to dive by 14% this year, with stress tests being done to assess the damage should prices in HK and on the Chinese mainland fall as much as 50%.
More recently, foreign buyers have been taking over London – buying up as much as 70% of properties for sale. With bubble rumors in the U.K. capital, it only makes sense that flight capital will start landing in the U.S. this year. Considering the wealth stashed in London and Hong Kong, we are talking many billions that could be seeking rental property investments here in the next few months.
With Hong Kong the most expensive city in the world and London developments rushing to $8,000 per square foot, expect a side effect of this new capital influx to include pushing U.S. property prices up significantly. Some pockets of prime property may even separate themselves as unique asset classes of their own.
While the media continues to highlight the influence of ‘Millenials’ by driving demand back to urban centers, they aren’t the only force pushing this trend. Local governments are only happy to jump in and help increase density in order to save on public services and drive up tax revenues. The PwC report also highlights the aging Boomer population and their current migration to sunnier destinations with close proximity to medical care and daily conveniences. However, while this may be the immediate trend, the cyclical nature of real estate markets suggests that suburban settlements will come back in the longer term.
Sustainability and Eco-consciousness are continuing to trend as well. The public and investors of all types are increasingly being more conscious about what they back and are voting for sustainability and the environment with their dollars. People now want to make a tangible impact with every penny spent and invested. The next leaders in real estate will be those that really get this and position themselves where these trends merge.