Expert predictions: What to expect in the housing market in 2021
It is safe to regard 2020 as a year of firsts: a global pandemic in the hyper-connected world, a year with least transportation activity in the 21st century, historic recession levels, highest ever indoor occupancy levels, among other things. As we ease into the new normal, not everyone is clear on what to expect in the housing market in 2021. This is understandable, given a year of unprecedented challenges and projection-defying market dynamics. However, industry experts have managed to conjure up a few predictions, based on multiple market forces at play.
Surge in sales
According to Realtor, property sales in the US are expected to grow 7%, on the back of low interest rates and economic recovery. Millennials and Gen-Z buyers are expected to play a growing role in the demand-side economics. In fact, millennials comprised the largest share of US homebuyers in 2020, at 38%. This year, the shortage of supply could price out many, but their impact on market economics is set to remain unchanged. Conversely, in oversupplied markets like Dubai, millennial influence on sales is set to grow exponentially, particularly in the off-plan segment.
Low interest rates throughout the year
In the US, the mortgage rates are currently at 50-year lows. With the Federal Reserve expected to maintain a low-interest financial ecosystem throughout 2021, it could bode well for real estate sales. The same conditions can be expected in dollar-pegged economies like the UAE, where the Central Bank has increased lenders’ exposure to the real estate sector, besides offering added incentives such as good LTV ratios for first-time buyers and zero registration fees.
Prices could go either way
In the US, property prices are expected to rise by 5.7%. There are less than 500,000 homes for sale, down one third, from last year. In addition, high construction costs, labor shortage, supply-chain disruptions in materials and regulatory challenges are expected to impact supply. The prices of single-family homes could increase with dwindling supply, while multifamily and townhouses could witness the opposite effect. In Dubai, JLL expects property prices to decline by 8%, due to oversupply. High vaccination rate and resumption of construction activity could further add recessionary pressures. But low interest rates and affordability could offer a ray of hope.
Digitization comes of age
Stakeholders across the housing market value chain, from buyers to sellers to regulatory bodies, are expected to increase their technology adoption in 2021, to buy, sell and register properties. Leading property portals like Zillow and Bayut are developing full-stacked models, offering end-to-end services such as diversified listings, financial services and documentation. Even virtual, 3D tours are becoming commonplace in the marketplace, due to convenience, scale, reach and 24/7 accessibility. The need for future readiness and self-sufficiency is expected to drive demand for tech-enabled property operations and maintenance.
Buyer sentiments will take shape
The pandemic-induced uptick in remote working is set to become the new normal, with many leading organizations announcing permanent work-from-home policies. This, in turn, has rendered a knock-on impact on homebuyer sentiments. Many prefer larger spaces, value-added services and biophilic designs that suit their lifestyles, instead of proximity to offices, schools and public transportation. In 2021, such an experience-driven real ecosystem will be enhanced by sustainable and eco-friendly practices, with circularity at the core. And owing to a sudden wave of relocations due to remote working, new developments are mostly likely to spring up in low-density, tier-1 and tier-2 markets.
Housing markets gear up for inclusion
Following a year marked by renewed focus on racial and religious discrimination, many experts expect growth markets to promote inclusion in 2020. With the Biden-Harris administration expected to launch cost and down-payment assistance programs, and give tax credits, the US housing market is set for increased share of minority homebuyers. Across the world, policymakers in leading markets are set to reevaluate fair housing and community integration policies.
A big-picture perspective, for 2021 All in all, with vaccine breakthroughs and economic recovery gathering steam, the housing markets are poised for increased activity in 2021. However, distinctive forces could propel markets in different directions. Such disparities could be more pronounced among economies that find themselves at different stages of technology adoption. And with real estate poised for increased contribution to GDP growth, such differences could impact how countries position themselves in the changing global order.