Buying Or Selling International Real Estate in 2023: A Time of Uncertainty During the Upcoming Great Reset
A worldwide slump is on the horizon. When the dust settles in 2023, the real estate market will have experienced tremendous upheaval, yet with every crisis comes an opportunity. Many seasoned investors will see significant losses, and some may even lose everything.
When the “great reset” finally occurs, individuals who aren’t frozen with dread will be in a prime position to profit from the subsequent real estate boom. Today, I’ll go over the factors that will shape 2023’s global real estate market and share thoughts on where investors would do their best to put their money.
The market for Residential Real Estate in the United States
Following a 42% increase due to lockdowns during the epidemic, property values have since begun to decrease. Only a small number of U.S. markets will demonstrate any resiliency in 2023, and I expect real estate prices nationwide to fall by another 7–20 percent, depending on the region.
If anywhere in the United States loses value, it will be Miami, where I anticipate a loss of about 2% to 3% and where, in the extreme case, it may even gain 2% to 3%. Areas like Scottsdale, Arizona, which had significant price increases in 2021 and 2022, will experience the largest price decreases in 2023.
Investors in the United States would be wise to cash out their holdings at the present time and put the proceeds into less exposed foreign markets, such as those in Eastern Europe or Brazil.
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EUROPE
When interest rates rise, vulture funds (hedge funds that swooped in during the last recession, bought up big tracts of housing, and then jacked up rents as high as they could) will begin pulling out of the market. This will help alleviate the worldwide housing and rental cost crisis.
Demand from Ukrainian refugees will support E.U. housing markets in the first half of 2023, but emigration back home will alleviate the issue by year’s end.
In 2023, price growth for Spanish homes will reduce to 3%, and in some cases (particularly in parts of the market that have been experiencing inflated prices), prices may even fall by as much as 8%. If you’re looking to make a quick buck in Spain, your best bet is to buy in the secondary market where prices are lower, or to sign a contract on an off-plan construction project that will take at least three years to finish.
Changes in Portugal will mirror those in Spain, with the greatest impact felt in the capital city of Lisbon and the lowest-priced apartments faring better than those costing more than 500,000 euros.
A price drop of 5–9 percent is expected in Germany and the rest of northwestern Europe in 2023.
I predict that Northern Cyprus will be the best place to buy European real estate in 2023. Since this underappreciated market is not tied to the economy of the E.U. or the U.S., and since it is a low-cost tourist destination, it will attract more visitors during a recession, which will increase occupancy rates.
In the year 2023, a 33-acre beachfront resort in the Northern Cyprus village of Tatlisu is the piece of property I’d most like to buy.
The property features a restaurant, barbeque area, beach bar, supermarket, pools, tennis and basketball courts, and a meditation and health center, and is only 200 meters from a well-equipped beach with stunning views of the Mediterranean Sea and the surrounding mountains.
Prices for the beginning unit start at 74,000 GBP, including closing charges.
Buyers who pay in cash save 7%, and the developer also offers zero-interest financing. Rental and property management services will be provided onsite, making the properties turnkey. It is anticipated that returns will exceed 10%.
Even while the weak pound encourages global purchases of U.K. property, Brexit will continue to hurt the British economy.
The United Kingdom’s property market will have a small decline next year (10%). However, this may boost rental return on investment for new investors.
In 2023, the most profitable investments in the United Kingdom will be in vacation rentals, as well as in student and retiree communities.
Asia
The Chinese building industry’s implosion and credit collapse will continue to have repercussions throughout the Asian housing market. There will be a lot of huge projects that fail or are put on hold all around Asia, but notably in China.
In 2023, you shouldn’t invest in Asia unless you’ve first carefully studied the local markets and, second, you find a titled condo in an Asian city you enjoy visiting for a bargain price. There will be a lot of deals in Asia in 2023, but it’s not a good year to purchase off the plan.
South America
In 2023, Brazil will continue to be a promising market due to its broad and resource-rich economy, robust domestic property market, and freshly elected business-friendly president with a solid mandate.
Northeast Brazil is a great place to discover great deals on one of the world’s best sections of coastline. Cottages on the shore are available for as little as US$77,000 if paid in cash, with in-house financing also an option.
Area Situated Between Europe and Asia
The new investment residency visas and unrestrained foreign investment might make Dubai an anomaly in the subsequent global property slowdown, with price hikes of 10% or more possible in 2023.
Do your research before investing in the ultra-luxury Dubai market, as this is not a place to take chances.
2023 Real Estate Price Predictor Variables
Inflammation
The United States, Europe, and Asia will continue to feel the effects of inflation as it dampens economic growth and investment returns.
Only in Panama and a few other countries with extraordinarily strong and integrated economies will this inflation spike be avoided.
Panama is not a cheap real estate market, but it does provide some appealing possibilities for weathering the economic storm.
If you’re looking for a low-risk real estate investment in Central America in 2023, Panama is your best bet.
Argentina is a market where significant long-term value may be found if you are tough enough to wait out the gloomy few years ahead since the economy is in shambles and real estate is selling for pennies on the dollar in some locations.
Rates of Interest
We are nearing the end of the age of cheap borrowing, as interest rates are expected to peak in 2023.
U.S. interest rates increased by a staggering 250% in 2022, from below 3% to over 7% in a matter of months.
Even though interest rates are expected to drop to 4.5–5% in 2023, I anticipate a massive wave of foreclosures across the United States anyway.
Interest rates in Europe will continue to grow from their recent low of -0.5% in March to their current high of 2.75%. Short-term interest rates will continue to climb before leveling off at around 3.5 percent in 2023.
While not as catastrophic as interest rate hikes in the United States, this will still undermine efforts to boost northern and western Europe’s real estate markets.
Since U.S. interest rates are now so close to those offered by value markets in South America and Eastern Europe, investing in these regions is a much better option than leaving money at risk in the United States.
Dollar-British Pound Exchange Rate
The upheaval in Eastern Europe and the massive U.S. arms deals being finalized to supply Ukraine will keep the Greenback on a tear through the second quarter of 2023.
By the end of the third quarter of 2023, the value of the U.S. dollar will have returned to its more typical level of exchange.
While the exchange rate is in your favor, it makes sense to invest in real estate in a cheaper market.
Fighting in Ukraine
Europe’s real estate markets will remain skewed as long as the conflict in Ukraine lasts.
It’s fortunate that we never suggested investing in real estate in Ukraine or Russia until now because the markets in those countries have collapsed.
The housing scarcity caused by the influx of refugees entering Europe by the millions will support property prices in the medium run.
When millions of well-off Russians and Ukrainians escape their country, nearby Georgia, Estonia, Croatia, Montenegro, and other Eastern European states will feel the most acute rising price and rental pressures from the war.
Investment Profits
In 2023, returns on investment (ROI) will fall across the board, but the highest ROIs will take the largest hits.
You should pay attention to the markets that exhibit the largest price declines by the end of the third quarter of 2023, as these may be good places to reinvest by the end of the second quarter of 2024.
Investments in Northern Cyprus, Brazil, and certain regions of Portugal and Spain will provide reasonable returns for 2023.
Because of the impending recession, returns on investment and occupancy rates will fall in mature and expensive areas like northern Europe.
Real estate in the top 20% of the price per square meter in a certain location should be sold immediately before further price declines.
Value Investing
In 2023, investors will go back to value investing in real estate, with a focus on generating a slow but constant stream of income.
More large-scale developments in the West will be impacted by environmental, social, and governance (ESG) spending, altering demand profiles and driving up building costs.
A Logistical Attack Against Anti-Globalization
The global logistics system’s fragility became clear after the pandemic. Property developments are currently being held up by long lead times and delivery challenges. Therefore, builders will shift toward using more materials produced locally. Because of this, the cost of building supplies will rise slightly.
There will be a significant decline in the number of major developers who find it worthwhile to get all of their products from China.
Inadequately Protected Assets
In 2023, you’ll see an uptick in the availability of these. When markets shift to the point where an asset loses all of its true value and can no longer be sold, we say that the asset is stranded.
Some of these factors include the de-zoning of previously buildable land because of environmental concerns, the high cost of repairing older buildings that were constructed with toxic materials (such as asbestos and lead), and the possibility that currency fluctuations will cause property investment funds to have more debt than equity.
Airbnb
U.S. Airbnb reported falling yearly occupancy rates and returns on investment in numerous markets in 2022. Overinvestment in vacation rentals during the epidemic was at blame. And that, in turn, contributed to the explosive growth in rent prices across the United States.
Occupancy has plummeted, leading to foreclosures and a rise in the number of apartments being repurposed as long-term rentals.
In 2023, returns on investment for short-term rentals in the E.U. that are not part of a resort or hotel development will diminish, notably in prime or higher-end locations.
Pay Attention To The Basics
In 2023, when the market is most volatile, budget travel locations will emerge victorious. Luxury homes in Brazil selling for $200,000 will continue to attract buyers, whereas $2 million for a tiny property in Monaco will turn off most people.
Northern Cyprus condos under US$90,000 (called “pocket money condos”) continue to be a good investment and a tourist draw because of the low price.
When energy prices fluctuate more widely, the difference between the cost of building a house in a warm country and a cold country will become more pronounced.
When it comes to the recession, will it be as catastrophic as 2008? But it won’t be pretty, so you should probably start making preparations now.
