The real estate sector is heading towards substantial transformations and enhancements. With just one month remaining in 2023, the upcoming year, 2024, carries the potential for either promise or apprehension. Amidst this anticipation, real estate professionals are preparing to navigate potential challenges while also leveraging new opportunities. With evolving market dynamics and the continued influence of various external factors, the industry is gearing up to adapt to shifting consumer preferences and technological advancements. As the sector braces for the changes on the horizon, stakeholders are strategizing to ensure resilience and agility in the face of the ever-evolving real estate landscape. Hence, embracing these transformations with strategic foresight and adaptability will be crucial for the industry’s success and sustainability in the promising yet uncertain terrain of 2024.
What are the Challenges?
Following are the challenges that the real estate market might face in the upcoming year.
Political Turmoil and Global Economy
Political instability and the global economic climate have caused significant turbulence in the real estate market. Economic challenges such as inflation, sluggish GDP growth, high interest rates, banking stress, and geopolitical tensions involving countries such as Russia and China have compounded these difficulties. The CRE report advises a careful examination of the local landscape, as market opportunities can vary greatly from one location to another. While acknowledging the presence of risks, the report emphasizes the importance of facing these challenges head-on and making well-informed decisions in the real estate industry.
The Impact of Hybrid Work
The pandemic brought about a paradigm shift. At its height, 62% of office employees were working remotely, leading to the emergence of novel virtual work methods (CRE, 2023). A significant portion of these employees are persistently seeking additional remote work alternatives. They appreciate the convenience and flexibility, along with the time and cost savings from avoiding tedious commutes. Consequently, the concept of the office has shifted to the home or apartment, resulting in a substantial impact on downtown office markets. Furthermore, the impact of hybrid work is becoming increasingly apparent. Employers are realizing the importance of making office spaces more appealing to entice employees back. This might involve organizing special events, such as food truck gatherings coinciding with office days, or incorporating outdoor seating and patios to enhance employee satisfaction. Moreover, if a property fails to meet crucial criteria like location, accessibility, convenience, tenant amenities, or scenic views, owners should consider alternative approaches. This could involve repurposing outdated office buildings into residential units, senior housing, healthcare facilities, or hotels.
Housing Shortage
Pakistan is presently facing a housing deficit of around 10 million units, and this figure continues to rise, with almost half of the shortfall concentrated in urban regions (Amin, 2023). Also, in 2017, the housing disparity in Punjab, Pakistan’s largest province, was calculated at 2.3 million units, and it is projected to surge to 11.3 million units by 2047 (Zaheer et al., 2022). Rising interest rates and escalating construction expenses are making it more challenging to advocate for additional multifamily units. Similarly, the market for single-family homes is also grappling with increased costs. The disparity between the supply and demand has led to a significant surge in home prices in recent years, although prices have begun to level off, and even decline, in certain areas. Thus, ensuring access to affordable housing holds significant implications for real estate investors, economic growth, and public well-being.
Artificial Intelligence
Artificial intelligence (AI) has become essential for investors as they assess the properties they aim to purchase, sell, or retain, leveraging real-time data, enhanced analytics, and predictive models. AI is instrumental in providing this information, and recent advancements, such as the widely-discussed ChatGPT, are finding application within the real estate sector. According to the CRE report, while the significant strides in commercial real estate are not primarily attributed to ChatGPT, a multitude of proptech start-ups are revolutionizing data collection (Tracey, 2023). These ventures are incorporating extensive data sets and embracing probabilistic frameworks to contemplate future trends.
Scarcity of Labour
The scarcity of labor remains a persistent challenge for various industries, as finding skilled workers continues to be an uphill task. This shortage has been exacerbated by two main factors: the departure of the aging baby boomer population during the “Great Resignation” and the emergence of new employment trends among younger professionals, who hold distinct perspectives on the workplace. According to the report, the labor market’s dynamics hold significant ramifications for the real estate sector, as job availability influences the demand for real estate, prompting population shifts towards areas with greater employment opportunities. Notably, the younger generation prioritizes lifestyle over employment, representing a departure from the priorities of previous generations. This shift has compelled employers to pay closer attention to changing migration patterns. Additionally, young professionals are increasingly inclined towards entrepreneurship and favoring remote or contract work.
Advancements in Technology
Technology continues to advance with new trends emerging annually, and the real estate market is not immune to this progress. These developments have prompted real estate agents to transition towards utilizing social media marketing and embracing artificial intelligence coupled with machine learning, which has already revolutionized business operations. Navigating an unfamiliar territory can prove challenging, particularly for realtors less familiar with technology.
Shifting Consumer Trends
Consumer perspectives evolve over time, posing a potential challenge for realtors who must ensure their business strategies align with the preferences of their target demographic. Consumer decision-making is shaped by factors such as generational background, economic conditions, and socio-cultural values. Within the real estate industry, millennials and Gen Z are recognized as crucial target audiences. A forthcoming generational shift in home buying is anticipated, with millennials increasingly entering the residential real estate market. Research indicates that nearly all of Gen Z highly values home ownership. Adapting to these changing consumer behaviors presents a significant challenge for real estate agents, requiring them to accommodate the diverse perspectives of their target clientele.
Conclusion
In the face of the challenges presented to the real estate market in the upcoming year of 2024, it is crucial for industry professionals to remain adaptive and proactive. Addressing the complexities arising from various factors such as technological advancements, shifting consumer behaviors, and the evolving dynamics of remote work will be pivotal for ensuring sustained growth and resilience. By embracing innovative strategies and fostering a deep understanding of the changing landscape, the real estate sector can position itself to not only overcome these challenges but also to thrive and capitalize on the opportunities that lie ahead.
This article is written by Haneen Gul. Haneen is a research analyst at the Iqbal Institute of Policy Studies (IIPS).
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