Real estate experts predict that 2023 will be a year of recovery for the real estate market as the trend points to higher demands and lower prices of properties across the country and abroad.
When the pandemic hit countries, the real estate market slowed down. People postponed their plans to buy properties in the market because prices were shooting up owing to the fluctuation of mortgage rates and interest rates. The instability within the market for investors, sellers, and buyers is exacerbated by the Federal Reserve’s strict and aggressive approach to fighting inflation in the country. Nevertheless, demand for real estate properties was still high, but since the prices were riding the tides, people had to cancel some purchases.
However, experts now see that house prices have decreased by 0.3% year-on-year. The price growth of luxury properties globally has also slowed to 8.8% every year, a significant reduction from the 10.9% at the beginning of the year. CEO and president of appraisal company Miller Samuel, Jonathan Miller, said markets within the US are slowly recovering from the slump. While economists and the Feds talk about recession, Miller believes it will not be as severe as other economic crises the US has faced.
“Clearly, the pivot of Fed policy has had an impact on every housing market in the country because rates were too low for too long. It created this insatiable demand and obliterated supply,” said Miller.
Mansion Global, a digital real estate publication, said that many real estate markets in and out of the United States would experience significant headwinds going into 2023. For instance, London and Sydney will revitalize their house markets this year. The story is also the same for New York, Miami, and other residential areas in the US.
Real estate in the US
Mansion Global talked to New York and Miami industry experts, who concluded that many experts think the same. The mood is easing among investors in the real estate industry in New York and Miami. Bess Freedman, the CEO of Brown Harris Stevens, described how the real estate industry gained and suffered in 2022. She expects a better year. However, she also adds that the change might not be that big, as the dollar strengthens and the Fed’s relentless campaign to counter inflation,
“The first two quarters of 2022 were excellent, like superb. And then the third quarter started to slow down, and now the fourth quarter has really slowed down,” said Freedman.
“Real estate will be as it has been recently, which is a little bit rocky. It’s been ups and downs. There are still a lot of people spending a lot of money on expensive apartments—we just had somebody sign something for over $20 million. People are still closing and signing; they aren’t all walking away, but it’s slower. It’s going to be a little challenging in the first quarter and maybe into the second, but I think we’ll rebound and start picking up again,” she added.
“It creates a cautionary environment. No one likes uncertainty, and Manhattan is no different. We’re probably looking at a year closer to pre-pandemic, which was a little bit below average in terms of activity. The 2023 story is going to be normalized, [and] certainly not a boom,” adds Miller.
“Miami—and I think it speaks to a large portion of Florida—was rebranded as a place to work during the pandemic,” Miller said.
“The ability of remote work and greater mobility generally comes with higher compensation. So there’s been a restructuring of Miami real estate, not just because the significant excess supply has been obliterated, but because it’s providing a pro-business atmosphere that is pulling companies out of high-cost housing markets to Florida.”
“When you compare the third quarter of 2022 to the third quarter of 2019, you’re looking at a market with nearly 60% less supply and sales that are 22% higher. In 2023, we’re expecting more of the same: A limited inventory with relatively stable sales activity.”
The market outside the US
Interest rates in other countries like Australia have also increased due to several factors. According to experts, rising interest rates will continue in 2023, but this will not hinder other buyers from purchasing real estate properties. Regional markets in Australia have seen an increase in home sales.
“On the ground, we’ve seen a definite cooling of the market but little signs of distress. No one is rushing to get out of the market, but for those selling, there is less competition for properties, which is flowing through to flatter price growth,” explained Ray White agency’s chief economist.
“With interest rates expected to continue to rise, it’s looking like a much slower property market compared to what we’ve become accustomed to over the past two years,” she continued.
“After recording a steep monthly decline of 1.6% in August, the rate of monthly decreases in national home values eased. Across Sydney, the quarterly decline trend has eased from -6.1% over the September quarter to -4.4% in the three months to November,” wrote a report from CoreLogic.
Meanwhile, Mansion Global said that Dubie would see a massive boom within its real estate industry.
“2022 has been a record-breaking year in terms of transaction volume recorded at the Dubai Land Department, as well as highest price transactions for both rentals and sales,” explained Luxhabitat Sotheby senior global property consultant Andero Morgos.
“We are quite bullish on the luxury real estate market but do not anticipate prices to go up much in 2023. “The focus is all on the quality of the product now, especially branded residences which are being launched along with developers offering more supply of projects in the luxury sector to cater to the influx of millionaires and [ultra-high-net-worth] clients into the UAE,” he adds.
Photo Credit: Karsten Moran for The New York Times
Source: Mansion Global