Investing in real estate makes sense
The Cypriot real estate market is picking up steam, just like the real estate market around the world is booming – real estate investing is making sense.
The pandemic has thrown a wrench into real estate sales everywhere. As one great property manager and investor put it, “The whole of 2020 has been a big question mark, or maybe an endless series of swear words.
People don’t like to make big investments in times of instability. So the pandemic has seen many investors keep their powder dry and wait for clarity. Overall, global real estate investments fell 28%, according to researcher JLL.
“But now, from the United States to the United Kingdom to China, housing is experiencing a prolonged boom. Global valuations are skyrocketing at the fastest rate since 2006, ”according to Knight Frank, with double-digit annual price increases.
“But even in countries where an aging population is limiting demand, price growth has accelerated. With ultra-loose monetary policy that keeps borrowing costs down, house price inflation is now in double digits in many developed economies, from Sweden to South Korea, from Canada to the Netherlands to the United States. New Zealand – the largest increases were not seen in the capital cities, but in the suburbs. , small towns and rural areas, ”explains Oxford Economics.
Cyprus is experiencing the start of this boom. During the month of June, a total of 924 contracts for the purchase of real estate were filed in land registry offices across the Republic, which represents a 43% increase over the June 2020 figure of 646. retail and land.
The UK is experiencing a record boom outside of London for the first time in its history. One of the effects of the pandemic has been to make people want more space and more comfort, instead of being crammed into London apartments. So while the demand for apartments and houses in London is not increasing, Acadata says, finding a home outside of London is “scary”. According to Hamptons International real estate agents, almost a quarter of homes sell in a week, many before they even reach real estate portals.
Buyers would bid on homes without even seeing them because the demand is so great. Salespeople use a practice called “gazumping,” in which they take offers but don’t finalize until they get the best one.
Continental Europe is also benefiting from the boom, according to a recent report. Germany has experienced one of the busiest markets as the economy recovers from the pandemic crisis. The average price of apartments rose 11.42% at the end of last year, following year-over-year increases of 11.15% in 2019. On a quarterly basis, house prices increased by 2.29 % in the fourth quarter of 2020..
“Demand remains strong, driven by low interest rates, urbanization and the financial health of households. In recent years, the migration crisis and strong economic growth have added to the already strong demand in the country, ”the report says.
Portugal remains one of the strongest markets in Europe. The country experienced a real estate boom in 2019 and the market has remained resilient throughout the pandemic, with house prices in Porto increasing 4% and 12% in the Algarve.
Overall, the house price index fell only 1.2% in 2020 to 8.4%. At the same time, investments in commercial real estate increased at the end of 2020 and continued to improve this year.
Foreign investors accounted for 35% of purchases in Portugal, and this figure is expected to increase despite travel difficulties in 2021.
Sweden is another market that has seen fabulous price increases, almost 20% already this year, according to Oxford Economics.
Borrowing to buy homes has reached an all-time high, so much so that it has sparked concern from the Swedish central bank over a possible bad debt crisis. Outstanding mortgages now represent 190 percent of gross disposable income.
“From a credit point of view, one can only conclude that the market has been plagued by hysteria, which is related to the fact that central banks are pumping money into the system,” said Carl Johan Lagercrantz, portfolio manager at Strand Kapitalforvaltning AB in Stockholm. Bloomberg.
And, in the good old conservative Netherlands, there is talk of another tulip bubble, but for housing this time.
Home prices rose 15% in the first quarter of 2021 compared to the same period the year before.
Many in the Netherlands are buying homes now because they saved up for purchases during the pandemic, according to mortgage broker Willem-Jan Koudijs at De Hypotheker in Utrecht. “Our research shows that many Dutch people fear that the ‘housing bubble’ will burst again within a few years. At the same time, only one in five Dutch people believe that the financial consequences of the corona crisis have an impact on their own living situation or their mortgage.
So it seems that the huge increase in the number of mortgage applications may be explained in part by the fact that many homeowners secured their own (financial) situation during the uncertain “corona year”, especially when the rate mortgage interest seemed to increase. Now that they have obtained a lower mortgage interest rate for a longer period through refinancing and / or that they have renovated their home, they are confident about their future.
The global real estate boom, however, is raising concerns about how young people will advance on the home ownership ladder. It appears to be a boom for the “haves” rather than the “have-nots”.
“Every year, house prices are rising and the gap is widening between the haves and have-nots, the old and the young,” said James Pomeroy, an economist at HSBC in London. “Calculations around buying real estate have worsened over the past year as young people have suffered job losses and interruptions in education that could affect their income over the course of their lives. “