Investing in real estate starts to make sense again
The Cypriot real estate market is back on its feet, just as the housing market is booming worldwide – real estate investments make sense again.
The pandemic threw a wrench into property sales almost everywhere. As one major property manager and investor put it, “The whole of 2020 has been a big question mark, or maybe an endless string of swear words.”
In a time of instability, people don’t want to make big investments. So the pandemic has left many investors keeping their powder dry and waiting for clarity. Overall, global real estate investments fell by 28 percent, according to researcher JLL.
“But from the USA to Great Britain and China, residential construction is experiencing a sustained boom. Global valuations are rising the fastest since 2006, ”said Knight Frank, with double-digit annual price increases.
“But even in countries where aging populations are limiting demand, price growth has accelerated. Given the ultra-loose monetary policy that keeps borrowing costs low, house price inflation is now in double digits in many developed economies, from Sweden to South Korea, Canada to the Netherlands and New Zealand – with the biggest increases not in capitals but in suburbs, smaller cities and rural areas, ”says Oxford Economics.
Cyprus is seeing the start of this boom. In June, 924 sales contracts were filed with land registries across the country, compared to 646 in June 2020, an increase of 43 percent. Retail and land.
For the first time in its history, the UK is experiencing a record boom outside London. One of the effects of the pandemic has been people wanting more space and comfort instead of being squeezed into London apartments. So while the demand for apartments and houses in London is not growing, Acadata says that finding a house outside of London is “nerve-wracking. Almost a quarter of the houses sell within a week, according to real estate agent Hamptons International, many before they even get on the real estate portals. “
Buyers are reportedly bidding on homes without even seeing them because the demand is so great. Sellers use a practice called “gazumping” where they accept bids but don’t close until they have the best offer.
According to a recent report, continental Europe is also enjoying the boom. Germany has seen one of the most active markets as the economy recovers from the pandemic crisis. Average house prices rose significantly by 11.42 percent at the end of last year, after 11.15 percent in 2019. On a quarterly basis, house prices rose by 2.29 percent in the fourth quarter of 2020.
“Demand remains strong, supported by low interest rates, urbanization and healthy household finances. In recent years, the migration crisis and strong economic growth have increased the already strong demand in the country, ”the report shows.
Portugal remains one of the strongest markets in Europe. The country experienced a property boom in 2019 and the market remained resilient during the pandemic, with property prices up 4 percent in Porto and 12 percent in the Algarve.
Overall, the price index for residential property fell by just 1.2 percent in 2020 to a positive 8.4 percent. Meanwhile, commercial property investments rose in late 2020 and have continued to improve this year.
Foreign investors accounted for 35 percent of purchases in Portugal, and that number is expected to increase in 2021 despite travel challenges.
Sweden is another market that, according to Oxford Economics, has already seen incredible price increases of almost 20 percent this year.
Borrowing to buy houses has hit record levels, causing concern for the Swedish central bank over a possible NPL crisis. Outstanding mortgages now account for 190 percent of gross disposable income.
“From a credit perspective, one can only conclude that the market has been gripped by hysteria related to central banks pumping money into the system,” Carl Johan Lagercrantz, portfolio manager at Strand Kapitalforvaltning AB in Stockholm, told Bloomberg.
And in the good old, conservative Netherlands there is talk of another tulip bubble, but this time for housing.
Home prices rose 15 percent in the first quarter of 2021 compared to the same period last year.
Many in the Netherlands are now buying houses because they saved up for purchases during the pandemic, according to mortgage broker Willem-Jan Koudijs from De Hypotheker in Utrecht. “Our research shows that many Dutch people fear that the ‘housing bubble’ will burst again in a few years. At the same time, only one in five Dutch people thinks that the financial consequences of the corona crisis have an impact on their own life situation or mortgage.
The enormous increase in mortgage applications therefore seems to be partly explained by the fact that many homeowners secured their own (financial) situation in the uncertain “Corona year”, especially when mortgage rates appeared to be rising. Now that you have secured a low mortgage interest rate for a long time through refinancing and / or renovated your house, you can look confidently into your own future. “
However, the global real estate boom gives cause for concern about how young people will get onto the real estate ladder. It seems that this is a boom for the “possessed” rather than the “non-possessed”.
“House prices are rising every year and the gap between the haves and the haves, the old and the young, is widening,” said James Pomeroy, an economist at HSBC in London. “The calculation of real estate has deteriorated significantly over the past year as young people have suffered job losses and interruptions in education that could affect income over the course of their lives.”