Pragma Investments Management with 7 predicted real estate trends for 2022

Pragma Investments Management is based in Dubai and specialises in financial engineering, real estate investment, microfinancing and wealth management.

COVID-19 has evolved from a world-stopping global economic interrupter to a series of continuous challenges for most sectors and countries.

The real estate sector, for example, was thrown into chaos at the beginning of the pandemic. Immediate fears surrounding job losses or consumers being trapped by lockdowns made an initial impact on the market. However, the real estate market has adapted to the new reality as the pandemic has worn on.

How COVID-19 impacts real estate trends

And while for many countries, there is a sense of a return to ‘normalcy’, there are factors impacting property prices, consumer behaviour and investor sentiment. These will continue to do so as we move into the third year of COVID-19.

It’s difficult to predict with total accuracy which trends will affect the market in the most significant way, but the team at Pragma have pooled their collective resources to highlight the following.

7 trends you can expect to see within real estate over the next 12 months

Pragma Investments Management currently sees the following trends impacting real estate and predicts that they will continue to do so throughout 2022.

1.A calmer buyer outlook

There will be a calmer period following a prolonged period of consumer urgency in buying residential real estate. Less urgency will be linked to the need to move away from city centres, for example, or purchase properties with a great deal of outdoor private space.

Consumer trends away from urban areas towards coastal and rural regions soared during lockdown periods in most countries. There are some exceptions, of course, one of which is Dubai.

Wealth buyers flocked to Dubai to buy property over the last couple of years due to the security of the Government’s COVID response, the region’s safety, and the opportunities available.

Elsewhere, the pre-pandemic hotspots are now returning. Buyers are heading back to London, and New York City as their investor decisions are no longer driven by COVID.

The kind of departure that the market has experienced of people moving away from city areas will subside throughout 2022. This means that the second homes market will soften, while city centres will become more in demand. Prices should also stabilise.

2.Challenges for buyers of affordable housing

While luxury property regions will regain their footing in 2022, there is undoubtedly something of a crisis within affordable housing. For example, in the UK, those looking for affordable properties are dealing with higher barriers to entry, higher prices, a shortage of suitable stock and rising inflation.

For the majority of the workforce, wages are not rising along with inflation. Changes need to be made in this area, and it’s hoped that Governments will begin to step up.

3.Prices and offers will settle down

There has been a flurry of continually growing demand over the last 12 months or so. And while buyers are still adapting to significant changes in their lives – remote working versus heading back to the office, for example – the final weeks of 2021 will likely see a drop in price battles.

Asking prices will settle to a more normal state, and there will be fewer battles for properties in key areas.

4.Housing prices will continue to be out of reach for many

Unfortunately, there is a lack of stock for affordable housing space in places like the UK and the US. There are issues with new developments churning out houses that are not truly affordable, and this is impacting the sector.

For HNWI, there is more choice right now in some regions, although demand is rising sharply in key regions. Grabbing a pied de terre or city base in London, for example, at any level will become more difficult throughout next year.

5.The market will rebalance

With buyers focusing on a future that doesn’t include lockdown, there are more choices available. This means more movement and more leverage for investors.

6.Proptech will continue to drive value

Proptech was already becoming more widespread before COVID-19, but with agencies forced to adapt to a whole new way of selling, it has moved up the list of priorities.

Data and accessibility drive value, so the more innovative technology that drives the sector, the better. Developers and owners will be on the lookout for new solutions to use technological innovation to drive sales and increase the value of their properties.

The climate crisis is also contributing towards the rapid development of new technologies right through the construction and development phases. These needs aren’t going away, so it’s likely that technology will continue to change the way the market works and how properties are designed, developed and built throughout 2022 and beyond.

7.The commercial sector will continue to adapt

Retail, hospitality and office space have been hit perhaps the hardest by the pandemic. At the height of lockdown in the UK, for example, there was much media discussion over the possibility that the ‘office is dead’.

However, it doesn’t seem that there has been such a seismic shift after all. People are now largely returning to the office, which means returning to commutes, public transport or moving back to the city centres.

There will continue to be a weaker demand for new space in these sectors, with tenants wary of committing to long-term rents. This will force change with subleases and more innovative cross-sector use of properties that would otherwise remain empty.

The property sector has proven one of the most resilient around the world during this unprecedented time. No doubt there will be more fluctuations in the market as events unfold throughout 2022. However, there remain lots of opportunities for investors, particularly those with an eye on higher-end property in key areas.

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