Forecast, Insights, and Trends for 2024 in Real Estate
In this comprehensive overview, IPS 2024 delves into the forecast, insights, and trends shaping the global real estate landscape for the year 2024. Examining key markets including the UAE, USA, China, Saudi Arabia, and Egypt, we explore the anticipated trajectories, investment opportunities, and challenges in each region.
From the surge in sustainable practices and technology integration to shifts in luxury markets and the impact of geopolitical factors, this report provides a nuanced understanding of the dynamic forces shaping real estate on a global scale. Read on for a condensed analysis of the future of real estate in 2024 across diverse markets.
Global
In 2024, real estate investors anticipate positive trends globally, with increased activity and attractive yields. Savills' charts, based on a survey of their experts, reveal key insights.
Investment Activity: Globally, 52% expect a rise in prime office investment, 72% anticipate growth in logistics rents, and 85% foresee increased capital values in living sectors.
Outlook for 2024: The global property outlook is positive, with residential markets, especially multifamily sectors, showing optimism. Logistics property markets are expected to perform well, while offices, especially outside the prime sector, have a more mixed outlook.
Yield Corrections: Discrepancies between buyer and seller expectations will drive yield corrections across sectors and regions. Prime office sector yields are expected to increase in major cities, stabilizing after adjustments.
Global Investment Recovery: After depressed activity, a gradual recovery is expected, gaining momentum in the second half of 2024. The third quarter is anticipated to witness the most significant weight of the recovery, with major markets like the US and the UK driving the upswing.
UAE
In its comprehensive forecast for the Dubai real estate market in 2024, Off Market Listing (OML) anticipates significant shifts and trends that will shape the property sector in the emirate. The company highlights several key areas of focus that will define Dubai's real estate landscape in the coming year.
Sustainable living and green property development take center stage as the urgency for climate action gains prominence globally. With the COP 28 summit emphasizing the real estate sector's role in curbing carbon emissions, OML predicts a surge in sustainable living initiatives in Dubai. Aligned with the UAE's commitment to achieving Net Zero by 2050 and Dubai's 2040 Urban Master Plan, the emirate is poised to become a premier destination for investors seeking both business opportunities and a sustainable lifestyle.
Real estate digitization is another major trend that OML foresees reshaping transactions in Dubai. The emirate, known for its digital adoption, made history by accepting cryptocurrency for real estate transactions. OML predicts that blockchain technology will play a pivotal role, ensuring increased speed, security, and global accessibility, reinforcing Dubai's reputation for efficiency and business acumen.
Artificial Intelligence (AI) and "Proptech" are emerging forces in the UAE's real estate market, with OML anticipating their rapid expansion. AI is expected to expedite property searches, transforming the property search experience. Proptech, defined as property technology, is predicted to be a disruptive force in the industry, impacting how people buy, sell, and manage properties. The UAE's National Artificial Intelligence Strategy 2031 aligns with this trend, aiming to position the country as a global leader in AI by 2031.
The luxury property market in Dubai continues to evolve, with the emirate leading global markets for luxury homes. OML notes a record number of transactions for homes worth $10 million or more, signaling the ongoing demand for exclusive real estate experiences. The company predicts that personalization and bespoke customization will redefine luxury property acquisition for both local and international investors.
The post-pandemic era has led to a re-evaluation of office spaces, prompting a seismic shift in commercial real estate. OML observes developers adapting to the remote work revolution by reshaping office spaces to cater to the evolving needs of today's workforce. Expectations now include more homely office environments offering hotel-style services, enticing tenants back into revamped work settings.
USA
The USA real estate market is poised for a soft economic landing in 2024, with increased chances of avoiding a recession, according to a CBRE report. Despite a slowdown in economic growth and elevated downside risks, the commercial real estate sector is expected to witness increased investment activity in the second half of the year. However, the normalization of hybrid working arrangements is anticipated to continue limiting the growth of office demand.
Retail real estate fundamentals are projected to remain robust, driven by the scarcity of new construction deliveries over the past decade. The industrial market is expected to maintain its health, with net absorption levels comparable to those of 2023. The apartment market, experiencing the largest wave of new supply in decades, is predicted to temper rent growth, improving affordability for renters.
The hotel industry, while facing challenges such as competition from alternative lodging sources and a slower economy, is expected to benefit from fewer Americans traveling internationally, bolstering the domestic market. The demand for new data center development is set to attract institutional investment in 2024, as investors reallocate capital from the office sector to alternative real estate opportunities.
Despite uncertainties, the USA real estate market in 2024 presents compelling opportunities for investors. High interest rates and an economic slowdown may lead to bargain pricing for certain assets. Secondary office assets, already experiencing lower pricing due to rising vacancies, could become attractive for rehabilitation or conversion to other uses as interest rates fall and inflation eases. State and local government aid is expected to support this process in 2024.
China
In 2024, experts anticipate a slowdown in China's economic growth to 4.6%, following a predicted 5.2% expansion in the current year. This projection is attributed to a slump in the real estate market and stagnant consumption. Among 25 economists surveyed, 23 expect this year's growth to align closely with Beijing's official target of around 5%. While 12 of the 19 economists providing growth forecasts in the previous poll have raised their outlook, concerns persist about the high downside risk posed by the struggling property sector.
S&P Global Ratings forecasts a 4.6% growth rate in 2024, with a possible downside scenario of 2.9%, depending on developments in the property sector. The impact of this downside scenario is expected to be more pronounced in 2024, according to Eunice Tan, Head of Credit Research for Asia-Pacific at S&P Global Ratings. The real estate correction is projected to persist in 2024, affecting investment, household confidence, and local government finances, as noted by economist Sophie Altamatt at Julius Baer.
The sluggish housing market and weak consumer confidence are identified as the top two economic challenges by 13 out of 17 economists. Concerns about Beijing's ability to implement effective stimulus measures and uncertainties regarding the troubled real estate sector, with major developers facing financial difficulties, further contribute to the economic apprehension.
To address local governments' financial difficulties resulting from a sharp drop in land rights sales, Beijing issued new government bonds worth 1 trillion yuan ($140 billion) in October. However, analysts like Tetsuji Sano from Sumitomo Mitsui DS Asset Management believe this financing primarily aims to compensate for revenue gaps and support local financing platforms' debt servicing, as the capacity for economic support through public investments has reached its limit.
Moody's Investors Service adjusted China's credit rating outlook to "negative," citing concerns that increased central government support for local entities and state-owned enterprises could undermine fiscal strength and creditworthiness. Geopolitical risks, demographic challenges, and uncertainties related to U.S.-China tensions continue to impact China's economic outlook.
In terms of currency, economists expect the yuan to gradually rebound, influenced by the anticipation of U.S. Federal Reserve rate cuts. However, geopolitical risks and structural issues such as demographic changes pose challenges, with expectations of notable slowing in Chinese economic growth by 2034.
Saudi Arabia
The Saudi Arabia real estate market is anticipated to grow at a Compound Annual Growth Rate (CAGR) of 7.31% from 2024 to 2032, according to an IMARC report. Key factors driving this growth include increasing urban development, evolving living patterns, rapid expansion of e-commerce, a growing emphasis on sustainability, the rise of remote work, demographic shifts, and government policies. Real estate, encompassing physical assets and associated legal rights, plays a vital role in the economy, facilitating housing, business operations, and investment. Notably, low-interest rates have made borrowing more accessible, attracting investors and homebuyers. The COVID-19 pandemic has influenced the sector, with remote work driving demand for spacious properties in suburban areas, and e-commerce growth boosting industrial and logistics properties. Additionally, there's a focus on sustainable construction practices, and technologies like blockchain are enhancing transparency in property transactions, contributing to the market's growth in Saudi Arabia.
Egypt
The future of Egypt's real estate market in 2024 is marked by significant transformations, with a shift towards high-income luxury homes, mixed-use developments, and a focus on sustainability, according to an Inland Properties Group report. Economic expansion, government infrastructure investments, a growing population, and increased interest in smaller, efficient units contribute to the positive outlook. Challenges include global economic uncertainties, geopolitical concerns, affordability issues, and potential imbalances in supply and demand. The sector is witnessing technological advancements, sustainable living practices, and the rise of new cities, reshaping the urban landscape. High-income and mixed-use developments, especially in East Cairo, aim to redefine urban living by combining convenience and luxury.
Despite challenges, the real estate market offers promising investment opportunities, driven by government initiatives, improved regulations, and the demand for affordable housing and modern commercial properties. Strategic investments in well-planned projects, especially in new cities and coastal properties, present avenues for stable returns, catering to changing consumer preferences and the demands of younger generations.