But the pandemic has triggered many changes in the sector – particularly in big cities – that may affect your investment strategy.
We're here to help you find the answers as you optimise the property portion of your portfolio. Here are some key market trends to keep an eye on.
Moving to a big city was once an aspiration for many young people. But all that changed with COVID-19, which greatly reduced the appeal of urban living.
Restaurants, bars, and leisure facilities shut down as the virus spread quickly in indoor public spaces. Lockdowns and remote working also confined many residents to their small rental homes.
As the pandemic wore on, many city dwellers decided they wanted more space or a bigger garden, things that are often not affordable or available in cities. This forced people out of the urban core and into places where property is cheaper.
The impact of urban flight is magnified by a lack of people moving in the opposite direction.
Many people who would typically move into urban areas were unwilling or unable to do so in 2020. Young people are also starting their jobs or education online, causing many to stay in their parents' homes for longer.
As city dwellers often rent – rather than purchase – property, the shrinking urban population has dampened demand and increased rental vacancies. This has driven down the price of rent in urban centres, including San Francisco1, London2, and Hong Kong.
While rent has dwindled, housing prices have risen globally. One of the main reasons is that those who are leaving cities are more likely to be able to afford a home where property is cheaper.
Furthermore, would-be home buyers have benefitted from a combination of low interest rates and income levels that haven't been overly affected by the pandemic.
As remote working continues, it may be hard for cities in the developed world to regain their pre-pandemic appeal. COVID-19 has accelerated the shift towards smaller urban areas as people seek more spacious homes and green spaces. So it may be hard for rents to move substantially higher.
Looking ahead, investors should monitor population flows as a critical determinant of rental demand, prices, and, in turn, aggregate inflation.
If the end of COVID-19 results in a return to urban living, then rental demand and prices could recover. However, if these flows are held back, lower rents will drag on headline inflation for some time to come.
HSBC can help you capitalise on strategic investment opportunities in the quickly evolving global housing market. We can facilitate your wealth ambitions with products and services tailored to property buyers seeking sound investments around the world.
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HSBC Holdings plc has prepared this article based on publicly available information at the time of preparation from sources it believes to be reliable but it has not independently verified such information. HSBC Holdings plc and the HSBC Group (together, "HSBC") are not responsible for any loss, damage, liabilities or other consequences of any kind that you may incur or suffer as a result of, arising from or relating to your use of or reliance on this article. The contents of this article are subject to change without notice. HSBC gives no guarantee, representation or warranty as to the accuracy, timeliness or completeness of this article.
This article is not investment advice or a recommendation nor is it intended to sell investments or services or solicit purchases or subscriptions. This article should not be used as the basis for any decision on taxation, estate, trusts or legacy planning. You should not use or rely on this article in making any investment decision. HSBC is not responsible for such use or reliance by you. Any market information shown refers to the past and should not be seen as an indication of future market performance. You should always consider seeking professional advice when thinking about undertaking any form of prime residential or commercial property purchase, sale or rental. You should consult your professional advisor in your jurisdiction if you have any questions regarding the contents of this article.
1 Source: Apartment List Data
2 Source: HomeLet, Zoopla