In 2022, the urgent frenzy of house purchasing fueled by wealth gains and demand for space throughout the world is expected to fade, with price rise returning to single digits in many locations and sales decreasing due to a lack of inventory. Nonetheless, the lifestyle patterns that evolved during the home-buying boom will continue to exist, if not grow, in this year. This is especially true in the case of remote employment, as many businesses have come to terms with the demand for more flexibility in the long run. This implies that home offices, outdoor space, and buildings that allow inhabitants to work from the building will prosper.
As many people settle into new houses in new places, home design that is highly functional and encourages well-being will remain a major focus. Though the impact of the highly transmissible Omicron variation on the pandemic's path is uncertain, rising interest rates, greater overseas travel, and growing concern for environmental sustainability are all expected to affect real estate this year. We examine 2022 through the lenses of leading luxury markets, smart-home technology, design, amenities, and new innovations in the West in comparison with the Philippine market.
Mortgage rates are expected to climb.
Mortgage rates are expected to climb as the Federal Reserve tightens its monetary policies in the US. The Federal Reserve has chosen to act in response to increasing inflation, which reached 6.8% in November, the highest level since 1982. At the same time, the jobless rate has significantly decreased, falling to 4.2% in November. The Federal Reserve has said that it would cut its asset purchases used to bolster the economy sooner than planned due to job growth and rising inflation.
Investors also expect more rate hikes this year than they did early in the year. Two rate rises are expected in 2022, followed by three more in 2023 and 2024, according to Bank of America. As a result of the predicted rate hikes, mortgage rates will rise. Mortgage rates will average 3.3% in 2022, up from 2.99% now, according to Fannie Mae's Economic and Strategic Research Group. Meanwhile, experts at the Mortgage Bankers Association (MBA) predict that interest rates on 30-year fixed loans would climb to 4% next year.
For Philippine investors, the Bangko Sentral ng Pilipinas (BSP) will most likely keep interest rates at 2% for 2022. This poses great opportunities for big or small investors in the country. This initiative is a serious effort of the Philippine government to further drive the economy and to attract more foreign investors to the country this year.
Housing demand will outweigh supply.
Despite higher interest rates and a drop in mortgage origination, home demand is expected to remain strong. "Of all the shortages plaguing the US economy, the housing shortfall likely linger the longest," according to Goldman Sachs experts. The available supply of dwellings has been decreased to the lowest levels since the 1970s due to current demand.
According to Goldman, a supply-demand mismatch will result in a multi-year housing bubble. States are expected to de-regulate land use, which should assist increase building activity, according to the business. Homebuilding is expected to expand the housing supply by 1.65 million per year. When demolitions are factored in, net supply is expected to rise by 1.4 million units.
The opposite can be said for the Philippine market. By the end of 2021, Metro Manila expected an additional 10,061 units in their supply, mostly from the Bay Area and Fort Bonifacio. This poses a 198% increase in supply entering 2022. Demand for residential properties are said to gradually pick up by second quarter to the latter half of this year. With more developments underway, there will be enough supply for the possible increase of demand in the market. Currently, Overseas Filipino Workers continue to drive the residential demand and will likely continue to do so in 2022.
The growth in home prices will continue, although at a lesser rate.
Home prices increased approximately 20% from August 2020 to August 2021, a one-year high. Experts predict that strong demand will continue to force prices higher, but not at the same rate. From October 2021 to December 2022, Goldman anticipates a 16 percent price increase. Home prices are expected to grow 13.6 percent between October 2021 and October 2022, according to real estate specialists. Other analysts, on the other hand, do not expect prices to rise as quickly. Home prices are expected to rise by around 8% and 7%, respectively, according to Fannie Mae and Freddie Mac. Meanwhile, the MBA is one of the few that predicts a drop in prices by the end of next year, with prices decreasing 2.5 percent.
Property prices are likewise expected to increase by 1.5% in the Philippines by this year. Moreover, rents may expect to have a 1.7% hike based on rebound in local and foreign investor sentiment as well as a gradual recovery in office space absorption according to a study made by Colliers.
The number of foreclosures will rise.
Despite the financial difficulties many people suffered during the epidemic, owing to a countrywide foreclosure moratorium, foreclosures have been almost non-existent over the previous 18 months in the west. However, the moratorium expired in July, and as a result, foreclosure rates have already begun to rise. According to ATTOM Data Solutions, foreclosures increased by 34% in the third quarter of 2021, compared to the second quarter, and by 68 percent compared to a year ago. While actual volume is still significantly below historical averages, foreclosures are expected to rise as the new year approaches, especially as more homeowners exit forbearance programs.
In the Philippines, there is a total of 11,106 foreclosed properties from the Bank of Commerce that are currently for negotiated sale. These include properties from Metro Manila, Luzon, Visayas, and Mindanao areas. Included in this list of real estate are memorial lots in provincial areas.
Foreclosures may or may not increase for 2022. According to Forbes, the "generational progression" will peak this year which will contribute to more millennials getting off the renting phase and transitioning to owning residential property. This may contribute to a lesser number of foreclosures and an increased number of owned real estate.
The property market is being impacted by climate change.
The spring and summer of 2021 will likely be remembered as the year when most of the globe began to take climate change seriously. For millions of people all throughout the world, the theoretical became terrifyingly real. The US West has been beset by devastating wildfires, record heat, and drought. Massive floods wreaked havoc in New York City, Louisiana, and other regions of the world, including China and Europe. According to a United Governments assessment on climate change, nations must act immediately to protect the earth from potentially catastrophic weather disasters
What does this signify for the real estate industry? The industry is the leading source of greenhouse gas emissions and global warming. Buildings are responsible for up to 40% of worldwide energy use and carbon emissions. Sector leaders and investors are in a unique position to help mitigate the worst consequences of climate change. Many others, though, are not convinced. Environmental, social, and governance (ESG) values are frequently mentioned by executives and investors.
Climate change might appear to be an intractable issue that is impossible to overcome. The property industry, on the other hand, is well-positioned to assist mitigate environmental hazards and boost resilience. It's past time to stop talking about climate change and start acting on it. The objective is to produce long-term advantage and value, not just to check a regulatory box. Setting performance-based requirements in ESG and zoning rules is one approach to get there, and then letting developers and other stakeholders figure out the details is another.
Many people were stopped in their tracks by the epidemic, but many more were put in motion. People who were given the freedom to work remotely discovered that they could attend meetings from 1,000 miles away just as easily as from 10 miles away. Hence, there’s been a growing increase in real estate sales in non-urban location all around the world.
If you're at any point of the home-buying process, it's critical to keep an eye on housing market trends. With the rapid advancement of technology and the rising market price of homes, it may be in your best advantage to make a commitment sooner rather than later. As a house buyer or seller in 2022, there are many wonderful features to look forward to, but be aware of the drawbacks as well. Purchasing and selling real estate has never been simpler, and current trends indicate that it will continue to be so in the next year.