Nick Churton of Dale Sorensen Real Estate’s London office looks to a genius to make some sense of the current international real estate market and offer some pointers for the future.
What Isaac Newton, who formulated the laws of gravity in the middle of the 17th century, would have made of the current gravity-defying real estate market is anyone’s guess. But, no doubt, like most people he would have been flummoxed.
Even a genius like Newton, who worked from home during the plague of 1665/66, would have had difficulty making any sense of this market. Despite a global killer pandemic, tens of millions of people out of work, nations in lockdown, travel halted and national treasuries handing out trillions in support of businesses, jobs and mortgages, the real estate market booms. It should, by any calculation, have plummeted like an apple from a tree. Instead, the market didn’t fall; it held itself in suspended animation for a while before surging upwards.
By any estimation the market should at least have mirrored the slowdown experienced after the great recession of 2008. But from the Antipodes to the Americas, and from Europe to the Far East, residential property prices in many countries are soaring. According to the Organization for Economic Cooperation and Development (OECD), it’s the fastest year-on-year growth in the past two decades.
But perhaps we can learn something from Newton, whose third law stated that to every action there is an equal and opposite reaction.
Covid made homeowners and homebuyers react by moving from cities and buying larger homes in less crowded areas where they could work from home. At the same time interest rate cuts kept mortgage repayments manageable and vaccines have generated confidence.
It wasn’t long ago that real estate professionals were preparing for the worst. Now the market, which is experiencing low inventory levels, is seeing increasing values with selling prices often well exceeding their asking prices.
Whilst most pandemic market activity has been in domestic markets, the international market has also been defying gravity. Despite travel restrictions, international buyers have been buying property sight unseen. Many homebuyers have been re-evaluating their lives or bringing forward plans to buy an overseas bolthole or permanent home. But this is just the tip of the iceberg; once travel opens up the signs are that there will be a super-surge of demand and activity from international buyers.
Growing numbers of sight-unseen global sales, ultra-competitive bidding on most listings and incidence of gazumping are all sure signs of a property market in boom mode. But let’s give Newton the last word in trying to make sense of what is going on. He said, “I can calculate the motion of heavenly bodies, but not the madness of people”.