With concerns about supply chain disruptions, inflation, and the long-term effects of the pandemic, the real estate market is currently experiencing a lot of turbulence. The outlook might seem bleak right now, but experts contend that 2023 will contain both negatives and positives. In this article, we will look at some trends and predictions about the real estate market in the coming year.
Decrease in House Prices
Capital Markets, a group that does economic research and surveys, says that the price of houses will decrease in the coming year. With increasing inflation, the interest rates of loans, which is the cost of borrowing one, will increase.
The effect is a lot fewer people will be able or willing to get these loans. Because of this, the cost of buying homes will decrease. The research group is also basing this on the number of home searches done on Google, according to data from Google Trends.
They say the number of visits to property websites has decreased this year, and the trend will continue in the coming year. This, according to the group, is a clear indication of the market turning, and the result is usually lower house and home costs to compensate.
The number of houses that are being put on the market has increased in 2022, with many of these homes being in the expensive home category. Buyers have more choices now, but there is a problem. Many buyers will not be able to buy these homes due to the reasons discussed above.
Additionally, because many of these homes are in the expensive category, the median value of homes has increased in the past year. Those doing minimal research will see an increase in median home values and think the whole market is like this. A more thorough look shows this is not the case.
Seller activity is set to increase because sellers are more willing to sell, perhaps due to inflation, but buyers will still be reluctant to buy due to the same reasons. These two phenomena will cause a housing glut, which is already being experienced in the renting space in some parts of the United States.
The bottom line is that there will be more houses for sale and rent than the number of people willing to rent, buy or invest in them.
A Demand for Property in Different Countries
There is increased demand for property and real estate in different countries, such as Malta. These locations are seen as more favourable by investors due to the quality of life they provide, affordable property investment opportunities, different types of properties to buy, and of course, favourable tax regimes.
Real estate agents are already gearing up for this shift, with many of them preparing property in Malta for different types of buyers, such as American and European investors and buyers. The demand for these types of properties is also supported by the number of businesses looking to establish themselves globally and for people looking for new opportunities in places that are great for them and their families.
A Difficult Time for First-time Buyers
Even with decreased demand for houses due to the affordability issue, the market is set to continue being competitive. Zillow says this is mainly due to those who want to move up by getting a better house. Many of these people are seeing an opportunity to do so as the market cools down and homes look more affordable to them
Some of these people are also buying homes because they see the huge growth potential in them. Zillow says that even though the market is slowing down, they expect the average home to see a 14.9% increase in value, and this number is enticing to those who want to invest in real estate if they have the resources to do so.
Mortgage Defaults Will Keep Increasing
The current economic situation around the world and high inflation levels are causing major mortgage delinquency in certain parts of the world and Europe. For example, the United States saw an increase of 11% in mortgage delinquencies in the first quarter of 2022.
With how things stand and many economists saying we are headed towards a recession or at least a massive economic downturn, things are about to get worse for those who are already struggling to keep up with their mortgage payments.
With home prices having already increased over the past two years and mortgage rates increasing due to inflation, certain markets will be out of balance for some time. This will slow sales and hurt homeowners who would like to sell their homes but cannot.
For homeowners who were wishing people could borrow so the homeowners could sell to them, this mortgage issue will cause problems, thereby increasing the chances of delinquency. This is especially true in markets considered stagnant where the number of buyers is already low.
Tighter Lending Requirements
One reason why inflation is so high right now is that there is a lot of money in circulation. Governments around the world are trying to arrest this situation, with the US government considering tapering, which will take money out of circulation.
Less money means lenders have less to lend. Banks and lenders will have to tighten their borrowing terms, and considering the fact that buyers make up a sizable portion of lenders, this could cause cascading issues down the road.
The 2023 real estate market is set to be a very turbulent one as things start to tighten and collect themselves, which will happen against a backdrop of increasing inflation and a predicted global economic downturn.