Difficult times for the real estate sector. A lot has changed in a short time, such as the sharply increased interest rates and construction costs, and tightened legislation and regulations.
However, as always, the current market also offers opportunities! Novel Finance lists the most important developments for you:
- Stabilization of interest rates and inflation
The increase in interest rates over the past 1.5 years is unprecedented. A long period of low interest rates and cheap borrowing has come to an end. Fortunately, the end of interest rate increases appears to be in sight and the medium-term forecast is more positive. Interest rates will most likely stabilize, as will inflation. This gives the market a more predictable character, which will eventually translate into an increase in the number of investment transactions.
- Increase in market supply and falling prices
The increased challenges in the real estate market also mean that there is more and more movement. Although there has not yet been a real sales wave, supply is steadily increasing, causing the price to eventually drop. Because more and more investors can no longer calculate the business case, for example at the time of refinancing, more and more real estate properties are coming onto the market, whether or not through forced sale. An increase in supply will result in a lower price if demand remains the same. This in turn offers opportunities for new investors.
- The market mentality is changing, ‘time heals all wounds’
Both buying and selling parties need time to get used to the changed market conditions with higher interest rates and lower prices. This puts pressure on activity on the investment market. However, now that market parties are slowly getting used to “the new reality”, the number of real estate transactions will start to rise again.
- The tightness in the tenant market
Due to the tightness in the tenant market, demand for real estate remains high. This has a positive impact on the business case for real estate investors as it leaves room for further rent increases. This situation will continue for a while given the declining construction production in the new construction/development market.
Novel Finance brings parties together and supports you in making the right decisions. Contact us if you would like to know more.