With the world seemingly in turmoil, how will markets respond in 2020, and where are the safe investment harbours?
With the world seemingly in turmoil, how will markets respond in 2020, and where are the safe investment harbours?
Hongkongers were likely happy to see 2019 out the door, even if it meant heading towards a muted 2020. In fairness, the SAR won't be alone. Trade wars are still raging and protests have spread across the globe (Chile, Iraq, Haiti, France, Colombia, the southern US border)— just two of countless factors that impact property investment. So what does 2020 look like for the world's key markets?
Australia
After a period, roughly between 2016 and 2018, notable for new taxes, lending restrictions, heightened regulations and then loosening restrictions, Australia seems poised to return to buoyancy this year. On the heels of an interest rate cut, buyers have started trickling back into Sydney and Melbourne, with Brisbane right behind them, and a weak Australian dollar attracting international investors. Sales volumes picked up starting in October—prices followed, at almost 2% in Sydney and 2.3% in Melbourne—and new supply has finally been able to respond to demand, though it still may fall short. “[We've] enjoyed a strong surge in sales … and we expect to see that continue to grow exponentially in 2020,” said developer Crown Group Director of Sales, Prisca Edwards. “We see a very strong year ahead, marked by the renewed interest from buyers because of solid market fundamentals: low interest rates, low supply and growing demand.” Brisbane, however, will be the star for its comparative value, competitive lifestyle and a growth rate (population, business) better than both Sydney and Melbourne. Westpac Bank puts Brisbane's property market as gaining 8% in 2020 and QBE predicts 20% by 2022.
The UK
At the tail end of 2019, following the missed Halloween deadline (again) for a “Deal or no deal” Brexit, Prime Minister Boris Johnson was compelled to call an election. The UK went to the polls and the country returned the Conservatives to a landslide majority government, with an anaemic Labour opposition (notably the borderline nationalist UKIP and Nigel Farage's Brexit Party won zero seats). Markets like nothing more than stability, and with Brexit still looming—and increasingly looking like a mistake—it's likely to remain a source of uncertainty, but at least the ruling party won't be a compounding factor. How many wrenches Labour and third place anti-brexit Scottish National Party can throw into the works (they make a 251-seat opposition to the Tories' 364) remains to be seen. For now the UK'S property 2020 is a non-committal “To be determined.”
North America
The US and Canada are two of the most stable markets in the world, and despite wavering support for federal governments in both countries (President Donald Trump faces a re-election challenge, Prime Minister Justin Trudeau narrowly averted defeat in October) both boast solid, unchanging economic and lifestyle fundamentals. In the US, a bafflingly strong economy (given the ongoing trade war with China) and a drop in housing starts as of September means the market is looking at rising prices and values in 2020 and into the next five years. With interest and unemployment rates remaining low, supply moderate at best and demand high, the National Association of Realtors predicts 5% gains on average across the country this year. True, expensive gateways (New York, Los Angeles, San Francisco) are low risk, but there’s better value to be found in emerging hotspots such as Spokane, Colorado Springs and Midland instead of Seattle, Denver, and Austin—the US’S hottest market according to pwc’s Emerging Trends in Real Estate 2020. “Its slogan (‘Keep Austin Weird’), deep pool of talent, unique and popular lifestyle, and ambitious commitment to business and real estate expansion,” make the Texas capital the country’s best bet. Apple is moving in, Dell built a medical school, and airport expansion has already begun. In Canada, purpose-built rental housing is making a comeback as key markets struggle with affordability, which doesn’t necessarily mean the country’s “MTV” locations—montreal, Toronto and Vancouver—aren’t still the highlights, though pwc sees the capital, Ottawa, edging its way into the spotlight. Torontonians looking for greater affordability, new infrastructure and a fastgrowing population (the city finally hit one million in 2019) seeking rentals make Ottawa Canada’s brightest investment market this year. If you can stand all the politicians.
Despite Brexit and the creeping influence of the Sino-us dispute, Europe is under pressure and is being forced to innovate.
Europe
Despite the UK'S dithering, Europe has gone about its business for the most part, and heading into 2020 Knight Frank has put Paris at the top of the growth chart for prime global properties. Forecasting 7% price gains despite ongoing gilets jaunes protests, Paris's, “Economic stability, low interest rates, constrained prime supply and strong tenant, as well as second home demand, will underpin price growth,” said Knight Frank in its 2020 Prime Global Forecast. “Home to Europe's largest infrastructure initiative, the Grand Paris Project, as well as the 2024 Summer Olympics, both events will provide further stimulus.” Also well positioned for growth in Europe is Berlin, and Germany in general, according to Engel & Völkers. Home ownership in Germany is relatively low (under 48% compared to the European average of 70%), and with so many tenants, good locations just outside major cities make for attractive investments, as price growth has not peaked. “The positive situation on the employment market and the current low rate of interest are creating ideal conditions for financing properties. Now is therefore the ideal time to buy real estate,” noted E&G board member Kai Enders in the agency's most recent residential report. Elsewhere in Europe, Madrid is still catching up from the 2008 GFC, giving it more room to grow than many European markets. Despite Brexit and the creeping influence of the Sino-us dispute, or perhaps because of them, Europe is under pressure and is being forced to innovate; pwc forecasts the continent as the winner in the Brexit divorce.