As the year is wrapping up, many wonder what the next year will hold in store for the real estate market. So far the outlook is positive. Even though there are some doubts that the current growth cycle is about to come to an end, there are many more positive perspectives that the current growth cycle has more life left in it yet. Here are some trends to watch for in 2017:
Earlier this year as Britain made their exit from the European Union and uncertainty took its place European markets are struggling to find solid ground again. In the process to find stability, the U.S. is safe ground for foreign investors to take a breather while the cards fall. Uncertain global markets make the U.S. market appear stronger and more appealing to global investors. Real estate in the U.S. is likely to continue to be favorable as its growth continues.
Although European markets are suffering a setback and China’s market is decreasing, other foreign investors are looking for investments with high yields and appreciation. Real estate in the U.S. is the likely choice for such investment as it is seen as the most stable world-wide. With uncertainty in such major foreign markets investors want stable footing.
It is likely that the feds will raise the cap rate one more time before 2016 is out, however the raise should be minimal as they don’t want to upset current trends. It is predicted that even with an increase cap rates won’t go much higher. Regardless, there will be movement as investors seek to capitalize on opportunities.
Supply is low and demand is high, which will help continue to fuel the growth cycle. After the recession, lenders were more than cautious about commercial construction lending, resulting in fewer available properties today.
Oil prices dropped significantly in 2015 and continued to drop into the first of this year. As of yet, prices have not recovered to half their high price from 2015. With oil manufacturers just now slowing production there is a significant surplus. With lower gas prices, that frees monies to spend on other commodities. Lower energy costs also positively influence construction costs fueling commercial improvements and growth.
So what do these trends mean to you? It means real estate is alive and well and is projected to continue to keep its momentum in the next year without any foreseeable setbacks. There might not be a lot of commercial construction as banks have stricter lending requirements and are looking to minimize risks, but there will be improvements to existing structures. Global investors will continue to look to the U.S. market due to its stability, and foreign money will fuel the U.S. economy. Money made available from lower gas and energy prices will shift into other spending arenas. Housing will maintain its curve as the U.S. economy continues to flourish. In other words, things look great for 2017.