22 Global Real Estate Market Trends of 2020
By Ben Wilson
Published 6 months ago
Entrepreneurs and investors the world over have turned to the property market as a lucrative form of investment for centuries. Whether as a retirement fund or a sound investment for future generations, real estate has been the go-to investment portal for many – despite having its fair share of peaks and troughs.
Real estate is still a sound investment in most instances. However, trends change, life happens and sometimes tides turn. In these situations, the property market can plummet, without a word of warning.
That is where understanding the emerging real estate market trends of 2020 come in. Experts admit that the outlook is overwhelmingly complex. The broad range of intertwining systems offers dynamic long term and short term outcomes. There is no way to simplify the future of real estate due to a wide range of factors that will impact the evolution and adaptation of the entire housing market.
There is no correct answer to “what will happen to the housing market in 2020?” but there are several clues that we can review to help connect the dots. We’ve collated a wide range of international trends as reported by real estate experts. Trends overlap and interact with each other creating effects that can be surprising.
In this article, we’ll explore these factors in more detail so that you can make educated choices in real estate moving forward. Trends are dynamic and changing. Everyone who is interested in real estate should become informed in the latest emerging trends (as published by experts in real estate) to keep ahead of the game.
Factors Affecting the Real Estate Market
The real estate market is influenced by the economy at large. Factors like employment rates, trade deals, interest rates, wars, and environmental issues all play a part in real estate market trends. The ongoing trade war between the US and China could impact the housing market indirectly.
Thankfully most economic forecasts paint a picture of growth in 2020. Both in property prices and in the job markets.
Real estate agents and investors can no longer afford to simply continue doing what they’ve always done. The best in the industry are embracing change. Taking on new technology and providing excellence to their tenants.
TREND #1: Possible Pandemic Risks & The Economy in 2020
The CDC estimates that the possible effects of a flu pandemic could be widespread. Causing 207,000 deaths and 734,000 hospitalizations in the US. These figures could prove to be significantly underestimated if statistics from the BBC Four Pandemic documentary are accurate. Unforeseen factors like a pandemic (for example the Novel Coronavirus) could significantly alter the outcomes for real estate in 2020.
To quickly delve into the possible ramifications for the global health emergency – there may be a ripple effect that touches all nations. China is the second-largest economic superpower, so if it is taken out of the game, this has to impact other global economies, such as the US property market.
Other than acts of god, there are many factors we can look at, to estimate how the property markets will move in 2020. The good news is that epidemics are estimated to have little importance in real estate in 2020.
TREND #2: Increasing Doomsday Headlines
Are these headlines true, or simply clickbait?
- Make a plan ahead of time
- Review costs
- Streamline tech and recurring payments
- Train agents to adapt to change
Will the Real Estate Market Crash in 2020?
According to Dan North, the chief economist at Euler Hermes North America, there is a low likelihood of a housing crash in 2020. Most economists sympathise with this sentiment and feel that housing prices will stabilize in 2020.
It doesn’t seem like there is any chance of the housing bubble popping any time soon. The perfect conditions to crash the housing market are as follows:
- High Unemployment Rates
- Low Wage Growth
- Rising Interest Rates
Let’s take a quick look at each of these statistics for both the UK and US markets.
So that you can see for yourself, whether you think that the real estate market is stable or about to crash.
Unemployment Rates in the US
The unemployment rate in the US is at its lowest since 2011. Currently, the unemployment rate in the US is 3.7% which is the lowest rate since 1969. Whereas, in 2011 it was at 9% for the US and 11.8% for California. Which means that unemployment rates are decreasing in the US. So there is no fear of the unemployment rates crashing the housing market any time soon.
Sources include: Eurostat, Bureau of Labor Statistics
Unemployment Rates in the UK
In the UK, the unemployment rate is 3.8%, down 4.2% from the 8% unemployment rate suffered in 2011. The next release date for unemployment rates is due to be published on 18th February 2020. But unless there is some massive change to the jobs market, I don’t see it changing drastically.
Sources include: Eurostat, Bureau of Labor Statistics
Wage Growth in the US
The median wage growth in the US saw a trough after the 2008 market crash. According to the Federal Bank of Atlanta, since the 2008 crash wage growth has risen from 1.6% to 3.7% at the end of 2019. Which proves that wage growth is healthy and will not impact the real estate market.
Sources include: Federal Reserve Bank of Atlanta
Wage Growth in the UK
The UK job market has seen a steady rise in wages and salaries annual growth since 2009 when it hit an all-time low of 0.2%. Now the wage growth rate in the UK is 3.9% according to the Office for National Statistics (ONS). This means that it is very unlikely for there to be a property crash, as the wage growth in the UK is healthy.
Sources include: Office for National Statistics
2008 and Interest Rates (Crisis point)
Here’s the thing – in 2008 (our last major market crash) the Fed raised the interest rates to over 5%. At that time there was global deregulation in the financial industry, mainly due to people taking out loans that they couldn’t afford. Also known as the “Subprime Mortgage Crisis.”
When you look at these figures, side by side with the situation we have today, it’s not comparable. Unemployment is at a record low at 3.5% compared
TREND #3: Predicted Sustained Low-Interest Rates in 2020
We are currently experiencing some of the lowest interest rates in 5000 years. These historically low interest rates have been artificially suppressed, which has increased the value of assets significantly. Borrowing has also become cheap. You can see the interest rates from 3000BC until now below.
Sources: Bank of England, Global Financial Data, Homer and Sylla “A History of Interest Rates”
The low-interest-rate in the US keeps demand high for new mortgages. This has been a big boost for investors in the real estate arena. Most experts state that they feel that the low interest rates will stay the same or even reduce in 2020. This means that real estate investment should remain an attractive option for 2020.
PRO TIP: Always be aware that interest rates can rise. If they do (which is possible) then repayments will increase and also the price of assets will decrease. Meaning your home will be worth less.
TREND #4: UK House Price Growth Jumps
Since the general election in the UK, that saw the Conservative leader Boris Johnson back in power. UK house prices are seeing an all-time high according to one of the leading estate agencies – Nationwide Building Society. Additionally, the number of approved mortgages in the UK spiked in December, to a level higher than we’ve seen in 5 years.
The outlook in the UK appears bright. For now.
Experts suggest that the demand will continue during 2020. In the UK, higher house prices are caused by the supply not meeting the demand.
TREND #5: US House Shortage
Just like the UK, there is a relative shortage of homes in the US, compared to the demand.
“We also think there will continue to be shortages of new housing in many markets, which will contribute to overall price growth.”
- Josh Stech, CEO, and Co-Founder of Sundae
Developers remain active, as the demand for new properties remains high.
TREND #6:Significat Drop In Home Ownership
One trend that we are seeing is the substantial drop in homeownership. People are not as keen on owning homes, thanks to the always-on communities and high house prices. We can now work from anywhere in the world, making working life more flexible than ever before.
We are expected to see a drop in homeownership in 2020 to levels seen only in the 1930s and ’40s.
TREND #7: Move Toward Multifamily Housing
Homeownership in the US has dropped from 69% a decade ago to 63% in the past decade. One reason cited is that house prices are too high for people to afford them. Resulting in single family homes being on the decrease and a trend toward multifamily housing.
This is particularly true for young millennials and Generation Z (people aged 7 to 22). Who cannot afford single family dwellings, and instead are choosing to cohabit.
TREND #8: Hipsturbia is Soaring
The term Hipsturbia is defined as “urban areas where hipsters live.”
A lot of areas around the US are embracing the live/work/ play environments and 24-hour cities. These areas are on the increase, last year California announced the development of 240 acres mega-development that will include hotels, serviced apartments, open spaces and passive recreation. This new area is connected to Silicon Valley by Caltrain and will cost in the region of $8 billion to develop.
Areas that were once agricultural markets are now being revamped as Hipsturbia areas. Developers are utilizing the old train lines to connect the new tech communities. Providing much-needed transportation.
Hipsturbia has also become a trend because of universities like Northwestern University and Stanford University. These hip, cool areas are popping up everywhere and include rooftop bars, restaurants, retail and 24/7/365 entertainment. The new Hipsturbia movement is attracting massive talent pools, by luring them to these always-on attractive environments.
TREND#9:Gurus Predict a Rise in Home Prices
The good news is that real estate gurus predict that property prices will rise in 2020 by 2.8%. Overall, this is a relative slowdown, as 2019 price rises were 3.3%, and 2018 saw house prices rise in the US by 5%.
Overall, since 2018 house price increases have dropped by 2.2%. They are still rising, but slower than they were in 2018,
The rise in house prices can mean more profits for people selling properties. On the flip side, it also means that many people are priced out of the market. This is a recipe for fewer viewings that can turn into sales. So make sure that you negotiate wisely, and get the best price for your property.
TREND #10: 2020 Will be an Expensive Buyers Market
As house prices are steep at the moment and have been on the rise for years. Houses can be easily priced out of your budget. If you’re going to be buying a property in 2020 – you need to be careful not to bite off more than you can chew. As a rule of thumb – make sure that you can pay a 10% deposit on your new house purchase. If 10% seems like a lot of money, then that particular property is probably out with your budget right now.
3 Tips for Home Buyers in 2020
If you are looking to buy a home, then take some time to prepare by following these real estate tips:
- Be patient
- Save up
- Expand your property search
TREND #11: Spike in First Time Buyers
It is difficult for first-time buyers to get into the game, as property prices are at an all-time high. The Home Price Index reached 218.27 points in September 2019.
Despite all of this, Matthew Gardner, Chief Economist at Windermere Real Estate in Seattle forecasts that there will be an increase in the volume of first-time buyers.
First-time homeowners represent a vastly larger prospective pool of buyers compared to current homeowners. The strong job market and low-interest rates are attractive for first-time buyers.
The current prediction is for 8.3million to 9.2 million first time buyers to become homeowners between 2020 and 2022. Which is a 7.6 million increase compared to the two year period between 2016 and 2018.
TREND #12: The volume of Home Sales Set to Decrease
Despite buyer demand, realtor.com has predicted that house prices will drop in the US in 2020. They estimate sales will drop by 1.8 million to 5.23 million. This is due to the bullish market, and the fact that people will simply not be able to afford the rising prices of homes.
As the demand decreases, this could, in turn, decrease the price of homes. Which might make some buyers hesitant to sell their home in 2020. Instead choosing to sit things out.
Pro Insight: The high prices of houses means that people are more likely to rent or stay put in 2020. less.
TREND #13: Foreclosures Will Continue to Fall
In 2010 the US saw a peak of 1,654,634 properties being scheduled for auction, repossessed by the bank or given default notices. In 2019 this figure was just 296,458, which is a 82% decrease in foreclosures.
The current trend for foreclosures is down, down, down – which is brilliant news for 2020.
Source: US Fed, Global Property Guide
TREND#14:Technology in Real Estate(Opportunity & Disruption)
Technology is reshaping all areas of our lives. It seems sensible to assume that technology will become a more prominent part of the real estate market going forward. Technology will be used extensively in the future to help identify investment opportunities and outline the risk to reward profile. According to PWC:
“The keyword for real estate’s future performance is transformation—in technology, in generational choices, in a reconfiguration of preferences by geography and by property type, and in the potential for new investors in the asset class.”
In 2020 and beyond we can expect to see an increase in the use of technology to enhance productivity. Technology can be used to better understand what size, design and functionality people are looking for in new build homes.
The construction industry is falling behind when it comes to adopting new technologies when compared to economic areas like financial services, transportation and health care. However, realtors will be using AI increasingly going forward. The U.S. Bureau of Labor Statistics (BLS) estimates that there will be a 10% rise in real estate managers jobs by 2026.
Pro Insight: Real Estate Agents of the future will be using Proptech tools – Including AI.
TREND #15: Increased PropTech Advancements
What does PropTech mean? “PropTech” is the term given to the digital transformation of the property industry.
Buying a home is often the single biggest investment that a person will make. For this reason, real estate agents will stay ahead of the game if they use PropTech tools that will enhance efficiency and improved customer service.
The type of AI (PropTech) that we’ll see in 2020 and beyond are:
- AI-driven buyer targeting
- Predictive analysis
- A customized experience for customers
- Monetizing data collected
- AI-driven automation
- Internet of things (IoT)
TREND #16: Urban Density: A Focus on Mobility
As successful US cities, like Glencoe, Frisco and Cary continue to show exponential growth, we can expect the price for apartments in these areas to rise. People are flocking to cities for employment opportunities. Which will, in turn, result in smaller properties and greater urban density.
Alongside urban density are the issues around mobility.
People want to live in homes that are connected to and within a reasonable distance of work and amenities. Transport solutions are therefore a key factor to consider in investment planning. Proper mobility planning could change urban property sales and lettings. Which could include mixed-use developments and an increase in how valuable certain districts are. If landlords can fix the mobility piece of the puzzle, they can make a lot more money out of urban housing developments.
TREND #17: Millennials Will Be Taking More Mortgages
Millennials, who span the ages 30-40 are predicted to be the number one demographic buying homes in 2020. There are currently around 80 million millennials in the US. With the vast majority looking for homes in the suburbs with good schools and safe neighbourhoods, to set up a family. This also opens up scope for commercial real estate developments for shopping and entertainment in the suburbs.
Millennials will enhance the possibility for investors to focus on developing suburban areas. The vast majority of millennials want to purchase properties in the suburbs to form family homes. The US census revealed that 2.6 million people relocated from cities to the suburbs in the year 2016-1017. Millennials continue to relocate into suburban areas. This trend has been ongoing for the past 40 years.
Why are Millenials Moving to the Suburbs?
By understanding why millennials are relocating to the suburbs en-mass, investors can benefit.
Millennials are looking for:
- Larger, more affordable homes
- Access to good schools
- Good transportation
- Easy access to the city
- Local retail outlets
The upward trend of millennials taking on new homes is a continuation of last year. Where we saw a massive 37% of home buyers being millennials.
Pro Tip: Millenials love to post their new home on Instagram – give them a hashtag to promote if you are a real estate agent.
Know What Millenials are Looking for
If you are selling your home, or are a real estate agent, then you’ll want to know what millennials are looking for in their new property.
Studies have shown that millennials are focused on amenities like laundry rooms, patios (for BBQs), garage and pantry. Also, be aware that 98% of millennials use their phone for everything – especially searching for homes.
In 2019 80% of millennials said they found their new home online. Millennials also use real estate agents 9 times out of 10 to buy their new home
Here are five key factors that millennials are looking for when buying a new property:
- Online Listing (optimized for mobile)
- Highlighted amenities
- Local Schools and community
- Agents to buy their homes for them
Pro Tip: If you are looking to buy a home in a sought after location – send a personal letter with your offer.
TREND #18: Top Landlords Will Provide Executive Amenities
Both the commercial and residential real estate letting markets are changing. Landlords are now competing by offering better amenities for their clients.
On the commercial side, there is scope to add in retail outlets, exercise classes/ gym, classes, and healthy food (like fresh fruit and vegetables). The list goes on and on. In more competitive areas, landlords are looking to provide better amenities and concierge services for their tenants.
The same goes for residential real estate landlords. Robust amenities packages can help one landlord stand out from the next. This is especially true for investors who want to get into the buy-to-let scene in large cities like New York or London.
Perks that landlords can offer may include:
- A better service
- Pet amenities
- Fitness areas
- Bike storage
- Communal services
- Outdoor space
- Fitness areas
… this is by no means an exhaustive list of amenities.
The benefits of adding amenities and perks are that tenants are willing to pay more. One survey found that 28% of tenants would pay an extra $32 (£24) per month to be able to have their pets live with them., and 41% said they would pay an extra $27 (£20) per month for an onsite gym.
TREND #19: International Politics (a Risk Factor for Real Estate)
There are many factors that impact the real estate market. Not least, the political terrain. International political instability has been rated a key concern in real estate, with a massive 81% of those surveyed citing this as a major issue impacting the stability of the real estate markets.
Factors such as areas where the government imposes rent controls to make houses more affordable can damage an investors portfolio. This type of tactic is frightening for investors and could alter the buy-to-let marketplace.
If you can’t get the amount of money that you need from your investment, then you’ll probably look elsewhere. This type of move could be counter-intuitive and lead investors to put their money elsewhere.
Top 10 US City Rankings
In real estate, it always pays to know where people want to live. The US News & World report combines data from trusted resources – analyzing factors like average salary, unemployment rate, crime rate, health care and education – to establish the best places to live in the US.
Here are the top 10 places to live in the US according to the US news and world report:
- Austin, Texas
- Denver, Colorado
- Colorado Springs, Colorado
- Fayetteville, Arkansas
- Des Moines, Iowa
- Minneapolis-St. Paul, Minnesota
- San Francisco, California
- Portland, Oregon
- Seattle, Washington
- Raleigh & Durham, North Carolina
Top 10 European City Rankings
If you are looking to invest in property in Europe, then it pays to get into the major European cities with more connectivity and liquidity.
The European cities that are expected to do well in 2020 are as follows:
Back to international trends…
TREND #20: Fresh Thinking Required for Baby Boomers
As life expectancy increases, the need for accommodation for older people is increasing. In the US, people 65 and over, represented 15.2% of the population in 2016, this is expected to reach 21.7% by 2040. People over 85 are expected to double in numbers by 2040 from 6.4 million in 2016 to 14.6 million in 2014. Therefore, there is an increasing and substantial need for quality housing aimed at the older population.
Post-retirement lifespan has increased by 7 years and life expectancy has risen. Many of these older people are now experiencing greater health. Baby boomers make up a considerable number of the older populations. These people often downsize their homes, and many property developers are suggesting this signals an opportunity for new high quality housing.
These older people are no longer posing a burden and have a 20% labor force participation rate. Fresh thinking is required to create suitable real estate solutions for the growing population of elderly citizens. The enhancements in life sciences means that many of these older people have plenty of time for living, working and playing – long into their elder years.
TREND #21: US House Prices Predicted to Increase
The question on many people’s minds is: will house prices rise in 2020? Or will house prices keep rising in 2020? House prices have been on the rise for 6 years and are showing subtle signs of cooling. As you can see from the graph below, house prices have been rising pretty steadily throughout the US from 2000 until now. Which suggests it may be time for things to take a downward turn.
Source: Standard & Poor’s, Global Property Guide
In 2020 the price of homes is predicted to increase. In fact, the 2019 Housing and Mortgage Market Review predicted that this equity increase will continue until at least 2022. However, at a much slower rate.
TREND #22: Expect an Increase in Residential Construction
Keeping with the upward trend in construction both in the UK and US, 2020 is set to continue this trend. The reason that so many new homes are being built is the increasing demand for new homes as the population expands. Alongside the low interest rates, which makes mortgages more accessible.
Source: US Census Bureau, Global Property Guide
Conversely NAHB Chief Economist, Robert Dietz warns that “builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China.”
The Bottom Line
Experts are predicting that house prices will increase in and we’ll (most likely) avoid a property crash in 2020 – phew! There will be a lot of competition for homes in the suburbs and also in crowded popular cities. This competition can mean that people will consider moving to other areas. Especially as many will decide to sit out 2020 – because house prices are too high, or because their property price is increasing and they want to cash-in in a few years time.
All in all the outlook for real estate in 2020 is bright in Europe, the UK and the US.
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