As we approach the end of 2018, many people are thinking about entering the property market next year or up or downsizing according to personal needs. As this is a time of year that we traditionally plan for the next, we take a look at some of the trends to look out for in property markets in 2019. Although markets are impossible to predict in terms of future performance, it is nevertheless possible to identify trends that have emerged this year to influence the next.

Here we take a closer look at the trends we have seen emerging in real estate markets during 2018 that are likely to continue into next year:  You can also check insights from people in the business by clicking here.

We’ll have more homes for sale, especially luxury ones

Recent years has seen an alarming increase in foreign buying at the luxury end, with mainly Chinese and Russian investors seeking to park capital outside their legislative borders. For that reason, developers have been largely playing to the high-end, which has resulted in a surplus inventory of big-ticket homes.

However, at the more affordable end of the property market, it is a different story. With the excess of buying at the top-end, the rest of the market has been neglected and now there is a shortage of supply of affordable homes. This short supply will inevitably drive prices up at this level of the market and although inventory growth has commenced to some degree in 2018, it is at a much slower pace to rising demand.

Although the inventory growth of housing stock is expected to be modest in 2019, the luxury end of the market is set to see a further boom. This is because the demographic of buyer at this level of the market generally have strong economies – or high-paying jobs – which mean they are able to afford to buy at the high-end irrespective of macroeconomic conditions.

Affording a home will remain tough

All of this transaction activity at the high-end of the property market has suppressed activity at the affordable end of the scale. Home sellers have largely been waiting for prices to increase to a level they are happy with before listing on the market. This has resulted in demand significantly outstripping supply which will inevitably make more “affordable” homes more expensive.

This situation is exacerbated for first time buyers due to the strong likelihood of increasing mortgage rates which is squeezing affordability. 2019 is expected to see prices growth continue at the affordable end of the real estate market which is a dynamic that will ultimately exclude more from getting on the property ladder.

Mortgage rates are currently around 5% and although a large movement isn’t expected, most analysts predict it will increase to 5.5% by the end of next year. Effectively, this means that the typical monthly mortgage payment will increase to around 8% more next year, which will be difficult for many to finance.

This situation is compounded more by the fact that incomes are only increasing by around 3% each year and so buyers that need to borrow heavily for a home purchase are likely to suffer more when mortgage rates go up again. First time buyers are most disadvantaged because they do not have any equity in an existing property to use as a deposit on a home.

Millennials will still dominate home buying

In 2018, we have seen millennials take the property market by storm, with them now representing the biggest group of home buyers in 2018. According to research, around 45% of mortgages are written for millennials compared with 17% for baby boomers. This is increasingly because of the significant help received from the bank of mum and dad although many millennials are moving from further education into executive jobs and commanding significant incomes.

Research also indicates that millennials are tougher negotiators that they predecessors, being more price-conscious that any generation to date. This is mainly because of the amount of student debt they are likely to have accumulated during their education which needs to be factored in when considering mortgage payments. Although millennials recognize the value of home ownership, they want to maintain a certain lifestyle and consequently they are more price aware than perhaps the older generation needs to be.

The millennials are also part of a growing generation of remote workers who are not slaves to the 9 to 5. The gigging economy has shown more growth in recent years than any other labor markets and this means millennials are not necessarily looking to city centers to find their new homes. This generation has the luxury of choosing where they work from and many in digital professions may never have any face-to-face contact with their clients.

This spread of home buying from outside city centers and into more suburban or rural areas will have the effect of diluting prices across the board. Whereas a property’s price was very much dictated by location in the past, this is not so much a consideration for the millennial generation.

The new tax law is still a wild card

In 2018, the GOP proposed a revision of the tax code was being hotly debated by Congress. Although there was talk that increased taxation would discourage people from entering the property market, there wasn’t a clear idea of what the ramifications would be.

This is a situation that won’t have any clarity until April 2019 when the new tax law takes effect. The inevitability of increased taxes is going to come as a shock to many and may force them to set aside any plans for home purchase.

The fact that people renting will likely face lower taxation than homeowners may drive growth in the rental sector. Increased taxation in 2019 in combination with almost inevitable mortgage rate hikes could make property much more unaffordable to a wider group of people than seen this year.

Although it will still be possible to get a bargain on the property market in 2019, it is likely that margins will be much tighter for many more people than this year. The bottom line will be how tough a negotiator you are once you’ve spotted the home of your dreams. You can find out more about how to enter the property market at the affordable end by scouring the internet but the opportunities will certainly be out there for the savvy buyer.

As we approach the end of 2018, many people are thinking about entering the property market next year or up or downsizing according to personal needs. As this is a time of year that we traditionally plan for the next, we take a look at some of the trends to look out for in property markets in 2019. Although markets are impossible to predict in terms of future performance, it is nevertheless possible to identify trends that have emerged this year to influence the next.

Here we take a closer look at the trends we have seen emerging in real estate markets during 2018 that are likely to continue into next year:

We’ll have more homes for sale, especially luxury ones

Recent years has seen an alarming increase in foreign buying at the luxury end, with mainly Chinese and Russian investors seeking to park capital outside their legislative borders. For that reason, developers have been largely playing to the high-end, which has resulted in a surplus inventory of big-ticket homes.

However, at the more affordable end of the property market, it is a different story. With the excess of buying at the top-end, the rest of the market has been neglected and now there is a shortage of supply of affordable homes. This short supply will inevitably drive prices up at this level of the market and although inventory growth has commenced to some degree in 2018, it is at a much slower pace to rising demand.

Although the inventory growth of housing stock is expected to be modest in 2019, the luxury end of the market is set to see a further boom. This is because the demographic of buyer at this level of the market generally have strong economies – or high-paying jobs – which mean they are able to afford to buy at the high-end irrespective of macroeconomic conditions.

Affording a home will remain tough

All of this transaction activity at the high-end of the property market has suppressed activity at the affordable end of the scale. Home sellers have largely been waiting for prices to increase to a level they are happy with before listing on the market. This has resulted in demand significantly outstripping supply which will inevitably make more “affordable” homes more expensive.

This situation is exacerbated for first time buyers due to the strong likelihood of increasing mortgage rates which is squeezing affordability. 2019 is expected to see prices growth continue at the affordable end of the real estate market which is a dynamic that will ultimately exclude more from getting on the property ladder.

Mortgage rates are currently around 5% and although a large movement isn’t expected, most analysts predict it will increase to 5.5% by the end of next year. Effectively, this means that the typical monthly mortgage payment will increase to around 8% more next year, which will be difficult for many to finance.

This situation is compounded more by the fact that incomes are only increasing by around 3% each year and so buyers that need to borrow heavily for a home purchase are likely to suffer more when mortgage rates go up again. First time buyers are most disadvantaged because they do not have any equity in an existing property to use as a deposit on a home.

Millennials will still dominate home buying

In 2018, we have seen millennials take the property market by storm, with them now representing the biggest group of home buyers in 2018. According to research, around 45% of mortgages are written for millennials compared with 17% for baby boomers. This is increasingly because of the significant help received from the bank of mum and dad although many millennials are moving from further education into executive jobs and commanding significant incomes.

Research also indicates that millennials are tougher negotiators that they predecessors, being more price-conscious that any generation to date. This is mainly because of the amount of student debt they are likely to have accumulated during their education which needs to be factored in when considering mortgage payments. Although millennials recognize the value of home ownership, they want to maintain a certain lifestyle and consequently they are more price aware than perhaps the older generation needs to be.

The millennials are also part of a growing generation of remote workers who are not slaves to the 9 to 5. The gigging economy has shown more growth in recent years than any other labor markets and this means millennials are not necessarily looking to city centers to find their new homes. This generation has the luxury of choosing where they work from and many in digital professions may never have any face-to-face contact with their clients.

This spread of home buying from outside city centers and into more suburban or rural areas will have the effect of diluting prices across the board. Whereas a property’s price was very much dictated by location in the past, this is not so much a consideration for the millennial generation.

The new tax law is still a wild card

In 2018, the GOP proposed a revision of the tax code was being hotly debated by Congress. Although there was talk that increased taxation would discourage people from entering the property market, there wasn’t a clear idea of what the ramifications would be.

This is a situation that won’t have any clarity until April 2019 when the new tax law takes effect. The inevitability of increased taxes is going to come as a shock to many and may force them to set aside any plans for home purchase.

The fact that people renting will likely face lower taxation than homeowners may drive growth in the rental sector. Increased taxation in 2019 in combination with almost inevitable mortgage rate hikes could make property much more unaffordable to a wider group of people than seen this year.

Although it will still be possible to get a bargain on the property market in 2019, it is likely that margins will be much tighter for many more people than this year. The bottom line will be how tough a negotiator you are once you’ve spotted the home of your dreams. You can find out more about how to enter the property market at the affordable end by scouring the internet but the opportunities will certainly be out there for the savvy buyer.