The Global Challenges And Considerations For Real Estate Investment In 2022
According to a recently released Colliers report, several key, large-scale trends will have a significant impact on the global real estate investment market this year, whether positive or negative. These include strong economic growth overall, but also challenges such as unprecedented construction costs and continued uncertainty due to COVID-19 restrictions.
By exploring the trends identified by this report and others, we can get a strong sense of what 2022 has in store for the average real estate investor.
One thing is clear: despite any predictions we may have for the future, real estate assets have remained reliable and consistent in their growth, and will likely continue to follow a strong investment trajectory—even in, and especially in, a post-COVID world.
A GROWING ECONOMY
On the positive or neutral side, we can identify a few more important trends which—although they may not always be positive for the average Canadian’s personal living expenses—will largely favour real estate investors overall. This includes increased economic growth, and rental growth specifically.
With rental units still in high demand, this trend continues to drive average rental costs upwards (especially in dense urban spaces and central urban markets), which reinforces stability for investors in multi-residential properties.
As for rising inflation rates, it is less clear whether they will end up affecting investment strategies more positively or negatively in 2022, but overall, investors are more confident than ever before in the continued growth of real estate. Although public market investments may risk volatility due to rising inflation, private equity can be shielded from those effects and acts as a reliable hedge against inflation.
RISKS AND CONCERNS
Other global challenges don’t bode as favourably for real estate investors and may cause certain market constraints.
Rising construction costs are by far the top global concern, as cited by 80% of real estate investors. Many have experienced firsthand that supply chain issues have affected the construction and building sectors, creating added expenses and longer timelines.
Whereas bigger players in the development space are able to adapt better to this (having supplier partnerships and workaround strategies in place), the supply chain issues have disproportionately affected smaller-scale development projects, including home renovators and retrofitters.
COVID-19 restrictions were also cited as a worrying factor by many, especially during the start of the Omicron surge in late 2021. By the summer of 2022 however, there should be far less uncertainty around returning to the workplace as the public continues to learn how to live with the pandemic.
WHAT THESE TRENDS MEAN FOR THE AVERAGE INVESTOR
These trends, identified by the aforementioned Colliers report and other thought leaders in the space, are not a perfect indicator of what this year holds. However, by leaning on real data and analyzing already growing trends, they do provide a strong case for certain key findings.
With real estate investments set to continue following strong upward momentum, those who have already planned for the challenges of increased competition in the space and rising construction costs will be best prepared for the 2022 landscape.
For this reason, it’s more important than ever for the average investor to consider one of Equiton’s Real Estate Investment Funds. Our Funds allow investors to passively earn income, benefitting from real estate growth without taking on the risks and responsibilities. Funds at this scale tend to be more profitable and sustainable, thanks to a carefully selected, diverse range of investment properties.