The beauty of the real estate market is the fact that it is an ever evolving beast which changes and develops not always in the way we expect. Investors can react extremely quickly to new issues and news which might impact particular markets and indeed the whole market. So, what factors will move real estate in the short to medium term?
Interest rates
While we see doom and gloom about some so called overpriced property markets on the verge of “collapse” the reality is that interest rates are assisting the flow of liquidity. When you bear in mind the fact interest rates on average in the developed world are just hovering above 0% this effectively rules out traditional savings accounts. Once you strip out inflation from the minuscule interest rates available on savings accounts the real value of these funds is depreciating year-on-year. Hence more interest in long term investments…..such as property.
So, while there has been some suggestion that interest rates could move higher in the UK, Europe and the US in the short to medium term, events in Greece and the wider European market for example are unlikely to encourage this particular shift. It does look as though interest rates will remain around 0% for the foreseeable future. This is certainly a positive for the worldwide real estate market.
Changing demographics
For some time now the so-called baby boomers, those who benefited from the most advantageous economic environment in living history, have been seen as the food for the future real estate market. While many are looking to move up the property ladder there are just as many now looking to downsize and they will play an integral part in the short to medium term worldwide real estate market. Many of them have significant savings and will be looking to maximise their returns especially when you bear in mind worldwide interest rates.
We only need to look at the US to see a market which has been significantly impacted by the baby boomers with many experts believing that we have just scratched the surface so far. It will be interesting to watch the shifting patterns of investment from this particular demographic.
Safe havens
We have discussed the issue of safe havens time and time again over the last few months with the likes of London coming under this group. The more issues we see in places such as Greece, with a potential knock-on effect to the wider European market, it seems the more demand for UK property which has no direct link to the euro. This is just one of many safe havens around the world and while eventually issues such as Greece will resolve themselves it is the unknown and the confusion which seems to attract investors to these areas.
Conclusion
These are just a selection of the issues which will be impacting the worldwide real estate market in the short to medium term. As we mentioned, the real estate market is very fluid, very fast acting and the characteristics and underlying trends can change in a relatively short space of time.