An insight into the global real estate market
The international real estate market is in a state of flux. In October 2022, the IMF forecasted a cooldown in real estate prices in 2023. After record highs since COVID, the market is now stalling. The world economic crisis is the primary cause of these price drops. To curb inflation, central banks have kept raising their key rates, which in turn has caused real estate loan rates to soar. Such increases are to continue this year. Mortgages have become more expensive, while inflation is squeezing purchasing power, especially for those on modest incomes.
We can already feel the impact of this crisis. In the face of an unprecedented real estate meltdown, China has seen sector sales drop by 43% in 2022. The same concern prevails in the United Kingdom, with a 28% drop. Other countries such as Sweden, Canada, Australia, and New Zealand are also experiencing significant declines. In the last quarter of 2022, property prices fell by around 3% in the United States and in Spain, 2.6% in Italy, 2.1% in the United Kingdom, and up to 7% in Germany. In Europe, Sweden is sending shockwaves of fear of a real estate collapse. Swedish real estate prices have fallen by 20 percent.
2023 confirms the downward trend with uneven declines, both globally and locally. Portugal, Canada, Sweden, Australia, and the Netherlands are the countries most exposed to a sharp drop in real estate prices. Such a fall would only benefit a handful of individuals. The vast majority (including those wishing to buy property) will not benefit from these drops due to soaring inflation and the rise in credit rates. Only locals and expatriates who can bear the loan rates of 2023 will be able to get good deals.
Where should you invest in property in 2023?
While experts are betting on a faltering real estate market, or even a collapse, some countries will manage to stimulate demand, namely those that can rely on foreign investors to support their real estate markets.
United Kingdom
For thousands of expatriates in the UK, the dream of home ownership could become a reality in 2023. It is indeed a real opportunity for foreign investors to make profitable financial deals. Despite all the difficulties, the UK property market has two advantages for expatriate investors: prices are expected to continue falling in the first two quarters of 2023 and even more so in the second half of the year. Actually, the supply of properties for sale is greater than the demand, meaning buyers will have more room to negotiate. In addition, real estate experts are predicting a drop in mortgage rates this year, based on the Bank of England's forecasts about inflation stabilizing at around 2 percent within two years.
Spain
Spain, one of the most popular countries among expatriates, is another great place to buy property, although the real estate euphoria is over. The market has been weakening since the end of 2022 and is expected to continue its decline this year. While the housing supply is expected to remain stable, the number of applicants is trending downward. As a result, experts expect real estate prices to fall by about 5%. This is a good deal for expatriates and foreign investors, who could negotiate further reductions. Spain is counting on foreign investors to avoid an economic meltdown and save the year 2023.
France
French real estate is expected to resist the global crisis. The year 2022 has been dynamic, with a volume of transactions that can be compared to the outstanding year 2021 (more than one million transactions). But 2023 will be more modest. Experts expect 900,000 to 950,000 transactions, with a slow price rise estimated at around 3%. Still, for expatriates and foreign investors, there will still be good deals, especially if they choose the proper cities. Lyon, Toulouse and Bordeaux are among the three cities where property prices are falling.
United States
Now is the right time to invest in property in the United States too. As in other countries, the US housing market has taken a new turn. As the COVID euphoria is now behind, the 30-year mortgage rates (the benchmark in the US) have dropped below 7%. They had jumped to 7.16% by the end of 2022, the highest rate in 21 years. But it's still high. This reflects the Fed's (Federal Reserve Board) tightening of monetary policy in an effort to curb inflation. In addition, there are wide disparities between states and cities, so if you're looking to benefit from the current real estate market, you might be able to get pretty good deals.
Real estate remains a safe form of investment
Real estate is one of expats' favorite forms of investments, and this is not likely to change anytime soon. In an international context of uncertainty, it is a safe haven with something concrete, tangible and reassuring. For expatriates, investing in real estate is a good way to prepare for retirement. It allows them to diversify their capital while taking advantage of possible tax benefits in the country of investment. It also offers a home base in case of a change of situation.
The key is to be well aware of the state of the real estate market in the country where you wish to invest. You will need to be fully informed about the country, the city, the property (new or old, apartment or house, etc.), and the purpose (primary residence, secondary residence, investment). Prices can indeed vary from one to two, depending on the criteria chosen. Surround yourself with real estate professionals who can help you avoid unpleasant surprises. In 2023, real estate remains a balanced, profitable and low-risk form of investment (much more than the stock market).
