In 2020, investors’ behavior on the real estate market will depend to a large extent on external factors. In the US, it will depend on the economic slowdown and the further movement into recession, in Europe and Great Britain on the unpredictability of Brexit, in Russia on the toughened sanctions and the potential economic stagnation, in the Asia region on the further growth of China’s economy and the developments in Hong Kong.
Investors have enjoyed a stable growth of the real estate market in the past five years: the commercial and residential real estate were growing faster than stock market investments. As a result, some investors expressed concern over the overheating real estate prices and a decreased return on investment in the next 12 months.
According to a poll held by the Preqin financial information agency, only 28% of investors expressed readiness to invest in real estate in the upcoming year. 51% of respondents are not going to make changes to their investment portfolios as they are receiving a stable profit from building management. 27% of investors believe that real estate should be sold and hope to reduce its volume in their portfolios.
Such specific facilities as apartment blocks located close to universities (to buy and rent out) and shopping malls will remain attractive.
The geographic distribution of investment in real estate in 2020 will be as follows: more than half of investors consider it attractive to invest in the US and Western Europe. As for the US market, investors tend to reduce investments in the luxury segment and increase them in the private middle-class houses in good neighborhoods to rent out.
In 2020, investors will place stake on the growing economies of the Asia region. The leading countries are China and India: 33% of respondents plan to purchase real estate there. Despite the sanctions and high geopolitical risks, Russia looks attractive for 2% of investors who are ready to invest in real estate there in 2020.
In the past five years, foreign investors have favored commercial dual purpose property such as shopping malls with offices and 4-5-star hotels. Next year will continue this trend.
Stagnation is expected in the private housing sector due to the price hike of 2018-2019. The potential lowering of the key interest rate by the Central Bank, as well as state programs aimed at improving the mortgage loan conditions will keep the prices afloat. Investors have already entered this sector and they do not plan to increase their assets in the upcoming year.
By Elena Gertsberg, CEO and founder of ADAR ADVISORS financial services company