Five key trends homebuyers should have on their radar
In the last of our series of articles extracting the key findings from this year’s Global Buyer Survey, we highlight some of the trends that will shape the performance of global housing markets over the coming 12 months.
4 minutes to read
The Global Buyer Survey from Knight Frank represents the views of over 900 clients from across the globe, looking at what impact the last year has had on buyers' attitudes to housing.
Here Kate Everett-Allen, partner, residential research, explores the five key trends homebuyers should be aware of before they purchase a property.
01. INFLATION
The pandemic has led to bottlenecks in supply chains with raw materials for construction a key casualty. This in turn is pushing prices higher. The concern for buyers is this is occurring at a time when the delivery of new stock and inventory levels for existing stock are already low. On one level this means accelerating prices, but it also means buyers are looking more closely at income generation, value opportunities as well as purchase, ownership, and sale costs to help mitigate the higher entry cost. Thorough research and good advice are fundamental to any purchase.
02. COOLING MEASURES 2.0
From taxing vacant homes to higher rates of capital gains tax, the number and range of policies aimed at curbing strong price inflation is on the rise. Knight Frank’s Global House Price Index confirms 13 countries and territories are now seeing annual price growth above 10% per annum. New Zealand, Ireland, Canada and South Korea have all introduced new rules and restrictions in 2021. Governments have a mix of targets in their sights, from speculative investors to international buyers and from bulk purchasers to second homeowners.
Research by the University of British Colombia suggests vacancy taxes on high-end homes has had little impact on the affordability of homes in Vancouver. With measures in some markets proving ineffective, more draconian measures may be around the corner. Expect tighter rules around who can buy what, and where, in the hottest markets.
03. GREENER LIVING
ESG – Environmental, Social and Corporate Governance – is everywhere, although the E is currently the attention grabber. Investors and corporates have arguably picked up the baton first with higher yielding returns and demanding shareholders their motivation.
For buyers, the bottom line is what matters. Cheaper, greener mortgages, or regulation-induced price inflation for the most energy efficient homes, will be what tips the balance for the end user. Recent climate events, a spate of zero carbon government pledges, and the UN's imminent climate change conference, COP26, will shine a light on the significant role housing and the real estate industry as a whole has to play. More regulation and greater competition could be good news for buyers keen to embrace greener living.
04. CURRENCY
Interest rates in some advanced economies are set to rise – although monetary policy committees are confident any move will be slow and incremental. Aside from a higher cost of debt, rate rises will boost currencies providing some buyers with an advantage when purchasing overseas. Capital Economics forecasts the US dollar, currently around 1.15 against the Euro and 1.35 against the British pound will, by the end of 2023, reach 1.20 and 1.40 respectively providing dollar-denominated buyers with an effective advantage in these and other markets.
The Eurozone, Switzerland and Japan are the least likely to tighten their monetary policy and hence see their currencies strengthen, thereby ones to watch for potential currency-induced discounts. Monitor currency movements when buying and selling.
05. TRANSIENCY AND TAX
Aspirations amongst the ‘work from anywhere’ generation may have been dealt a blow. Pandemic-driven digital nomads tempted by locations such as Barbados, Dubai or Portugal, may be called back to the office as companies could incur higher tax or social security liabilities in their destination country. Research by Leeds University estimates between £6.5bn and £32.5bn of UK revenue from personal income tax and social security contributions could be at risk if a third of higher rate tax payers were able to work remotely and 10% to 50% of this group opted to leave the UK. Replicate this globally and the tax loss could be significant.
However, companies are also realising that to attract the best talent they need to be flexible, so all may not be lost for remote workers, or buyers looking to capitalise on this valuable source of prime rental demand. The push and pull of the global investment landscape is changing fast, stay up to date via the Intelligence Lab blog.
For a deep dive into the Global Buyer Survey you can watch the Instagram Live discussion with Kate, Victoria Garrett, head of residential, APAC and Ed de Mallet, partner, global super prime.