The past year was golden for the real estate business in most parts of the world. Housing prices were soaring. In the United States, CNN reported that data from the Federal Housing Finance Agency showed an almost 20 percent increase in third-quarter prices compared to the same period in 2020. It was the largest annual increase for a quarter in the House Price Index. Prices were even twice that in certain areas of the country. Around six million residential properties were sold throughout the year, breaking the 15-year record.
According to the Global Property Guide, housing prices also had two-digit increases in 13 other countries. In the third quarter of 2021, it rose year-on-year by 32.4 percent in Montenegro, 17.97 percent in Sweden, 16.08 percent in Australia, 15.33 percent in the Netherlands, 14.56 percent in Puerto Rico, 14.37 percent in Jersey, 14.01 percent in the Slovak Republic, 13.39 percent in Pakistan, 13.12 percent in South Korea, 12.34 percent in Canada, 12.26 percent in Lithuania, and 10.12 percent in Japan. This includes a house and lot package.
For the commercial real estate market worldwide, 2021 showed a rebound from its slump in 2020. The World Built Environment Forum (WBEF) reported in its Q2 2021 Global Commercial Property Monitor that the sector had fully recovered by then. The biggest positive change was in prime industrial properties, followed by data centers, multifamily buildings, aged care facilities, secondary industrial real estate, student housing, and prime office real estate. Still, in the negative were prime retail spaces, hotels, secondary office real estate, and secondary retail spaces.
The Residential Real Estate Market in 2022
The forecast for 2022 is that residential real estate prices will continue to rise but at lower rates. The pattern is predicted to be global.
CNN cited a survey of the U.S. National Association of Realtors (NAR) among housing and economic experts, showing that the projection for 2022 is for a moderate price increase of only 5.7 percent. One of the reasons for the slower rate of price increases is the hike in mortgage interest rates mandated by the Federal Reserve. The Chicago Tribune reported that Freddie Mac predicts housing prices to increase by seven percent this year, while Fannie Mae expects 7.9 percent. According to CNBC, Zillow predicts housing prices to increase by 11 percent.
Data from Knight Lab shows that across 11 major cities around the world, the average prices of prime residential properties will rise by only seven percent as compared to nine percent in 2021. The highest increase will be in Miami at 10 percent; followed by Sydney at nine percent; Los Angeles at eight percent; Auckland and London at seven percent; Geneva and Madrid at six percent; Singapore, New York, and Hong Kong at five percent; and Paris at four percent.
The Commercial Real Estate Market in 2022
In terms of commercial real estate investments, JLL’s Global Real Estate Perspective believes that there will be growth in data centers, logistics, office spaces, retail spaces, and hotels this year. Buildings and workplaces will be retrofitted to meet the hybrid work arrangement and the net-zero goal of countries.
Knight Frank’s Active Capital study foresees that there will be record-breaking commercial real estate investments across borders in 2020, with 60 percent of all these captured by Europe, the Middle East, and Africa (EMEA). About half of the investments are expected to be from the U.S. and going toward the United Kingdom, France, Germany, and the Netherlands. Most of the investments are predicted to be in office spaces, logistics, and the multifamily residential sector.
According to The Business Times, CBRE likewise expects record-breaking commercial real estate investments in the Asia-Pacific (APAC) region, with a year-on-year increase of five to 10 percent in the volume of transactions. The focus will also be on office spaces and logistics, with total investments on these estimated to be as high as $150 billion.
Maximizing Available Technology
JLL points out that while big data could benefit commercial real estate companies in investment and returns analysis, optimization of operations, improvement of building sustainability, and designing employee-friendly workspaces, many companies do not have this capability. Systems are still outdated, and standards are inconsistent. In this situation, JLL recommends that companies use whatever data they currently have to generate insights that will improve outputs.
Other technological innovations can also be used in construction. These include building information modeling software, modular construction, 3D printing, drones, smart construction wearables, and construction robots, among others.
Similarly, real estate businesses focused on housing can use technology to lower the cost of construction and, therefore, lower the cost of homes. By lowering costs and prices, they will enable more people to afford homes and their sales will increase.