After an excellent year with a dynamic market and rising prices, US property is looking forward to further growth and excellent investment returns in 2016. Next year will see the consolidation of smaller urban markets as a preference among buyers and residential property as the best option for investors.
The recently released Emerging Trends in Real Estate 2016, published jointly by PWC and the Urban Land Institute (ULI), paints a very optimistic picture for the property market in the US over the next 12 months and beyond. One participant in the survey claimed that although “you can never forget about cycles, the next 24 months look doggone good for real estate”.
This optimism is based on several pillars. These include the consistent growth in the US economy, currently creating employment and by extension, wealth. Emerging Trends in Real Estate 2016 places job growth at the head of the list of important issues for US real estate in 2016, followed by income and wage growth.
Rise of the 18-hour city
The so-called 18-hour cities have been heralded as one of the US property markets to watch next year. These are smaller cities that are “hip, urban, walkable, and attractive to the millennials” and include locations such as the “villes” – Nashville, Jacksonville and Knoxville, for example – as well as cities like Austin, Charlotte and Seattle. PWC and ULI believe that these cities provide “better future opportunities for rising net income and appreciation” than giants such as New York, Los Angeles and Chicago.
In tandem with the rise in popularity of smaller cities goes a shift to the suburbs. Investors included in the survey believe that transportation will be the key motivation behind the purchase of US property by millennials. Properties located within 20 minutes of city-centre jobs will become increasingly popular, particularly among dual-income households and young couples planning to start a family.
Best locations for US property
Top of the markets to watch in 2016 for PWC and ULI are Dallas, Los Angeles and Austin. Dallas takes the top position for homebuilding, Los Angeles heads the best for investment and Austin offers the best development opportunities.
Florida is earmarked by the survey in a section entitled “Florida’s resurgence continues”. The report finds that the Sunshine State is ticking all the right boxes and that metro areas such as Orlando and Tampa have both improved considerably in the 2016 survey. One interviewee highlighted the diversity of economic opportunities in the state, currently registering above national average growth in both its economy and job market.
Housing predictions for 2016
Homeownership in the US is currently at a historic low and in Q2 this year, just 63.4 per cent of Americans owned their own home. PWC and ULI believe this trend will stabilise over the next year and hover at the level of around 65 per cent. This means buy-to-let US property will continue to be attractive, particularly in the short term.
The survey predicts continued rises in property prices across the country during 2016. Within Florida, predictions range from 3.5 per cent for Orlando properties to 7.3 per cent for properties in Deltona/Daytona.
In terms of housing type, Emerging Trends in Real Estate 2016 pinpoints multi-family properties as one of the best bets for next year. “Overall, we think that the demographic tailwind for rental apartments and continued urbanization is a longer-term trend that will make multifamily a good sector for a long time,” says the report, before reiterating that residential property in the US generally makes an excellent investment for 2016.
Source: PWC, Urban Land Institute