The broader uncertainty impacting the national and global economies is causing disruption to real estate, with higher rates hurting mortgage approvals and a lack of investor confidence leaving many projects in limbo.
This is of course a state of affairs with wide-ranging consequences across a whole host of professional fields, so let’s discuss a few of the most prominent examples, and attempt to predict what the future might hold for individuals and businesses in these industries.
Firstly, it’s impossible to talk about the downturn in the real estate sector that’s being experienced right now without exploring the implications for the financial services industry.
As mentioned, with rising rates, the number of people applying for mortgages in the first place is at its lowest level for 28 years.
Those who are able to apply and get accepted will face steeper monthly repayments, while existing homeowners who need to remortgage in the near term will be in an even trickier position. This is in spite of the fact that rates have been falling from the peak they hit late in 2022.
The upshot is that the professionals responsible for providing, negotiating and securing mortgages may have a harder time finding takers for the products they oversee. Unless inflation drops significantly, and rates follow suit this year, the market could remain in a state of stalemate.
Realtors & Real Estate Agents
The inevitable knock-on effect of a downturn in mortgage applications is the reduction in the number of buyers looking for properties, which is of course linked to the work that realtors do every day.
Agents might generally be said to be facing a lean period, especially if they are reliant on commissions from property sales to make up the majority of their income.
However, one of the tips for surviving the real estate downturn is to double down on ensuring that relationships with existing customers are maintained, and that agents with an extensive sphere of influence will be on firmer footing.
Sellers will be especially useful to work alongside in this problematic period, since they’ll be looking for a friendly face they can trust to market their property effectively, rather than leaving it to linger in the listings for months on end without any interest from buyers.
2023 did not get off to a great start for the construction sector, with a small fall in spending seen in the first month of the year compared with the final month of 2022. However, the good news is that it was still up by almost six percent year on year, so it’s not all doom and gloom, and there is a modest degree of optimism in this arena.
It should be no surprise to see that spending levels differ depending on the segment of the market you look at. While the aforementioned issues with mortgages could cause further pain for residential projects, this is less of an issue for commercial initiatives, for instance.
Meanwhile those involved in architecture and engineering are seeing opportunities brought about by the prospect of increased adoption of digital technologies this year. We’ve already seen machine learning make waves in this sector and many others, with exponential improvements in AI tools set to further transform and disrupt throughout 2023 and beyond.
The Bottom Line
As always, the future remains unclear both in terms of the real estate downturn and the adjacent industries it impacts. However, this year could benefit from small but not insignificant improvements in the outlook for the market, which would catalyze positive change in all of the areas discussed.