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By Amelia Lopez
Real estate has never had smooth performance charts. There are always variations in market trends and prices. Commercial real estate in 2022 has shown an era of uncertainty, with increasing inflation and recession affecting property values and investors losing confidence in the market. 2023 looks to be more of the same with perhaps even more critical issues on the horizon.
Even the best realtors in Albany, California, are preparing for a difficult season ahead! They are concerned about the industry’s situation, but are still working their best to prepare for the challenges ahead. Every industry has had to face challenges in this post-pandemic era, but only the ones who can deal with these challenges skillfully will rise.
Five Upcoming Challenges of Local Real Estate Investors in 2023
2023 is just around the corner, and we all are wondering what the year will bring for us. While there may be much technological advancement, it may also bring some challenges you might need to prepare for.
Like all other industries, the real estate industry is also preparing for a change in trends with some pre-existing and post-new-year challenges that may affect the direction of the industry.
Some significant expected challenges to be faced by local real estate investors in 2023 are mentioned below;
Inflation and Interest Rates
Many third-world countries and superpowers like the USA are expecting continued inflation bearing down on their people, still responding to losses made during the pandemic. Every industry experienced a downward curve in sales during this era as there was also large-scale unemployment and a lack of buying power.
Like many other industries, governments across different countries imposed high taxes and increased interest rates, which had a negative impact on investors. As a result, investors will now have to buy properties at higher prices, while returns will be significantly reduced.
Geopolitical Reasons
The political situation in various countries across the globe is uncertain. We are watching as to when and who will turn the tables for everyone else to impact us globally. Even the possibility of a third world war, with catastrophic stakes, is being viewed as a possibility. Whether your country is directly involved or not, the world will be severely impacted.
War, of course, impacts the real estate sector of countries as well.
The Weather
The year 2022 brought some catastrophic weather where significant parts of the world had exceptionally high rainfall and floods in major parts of some countries. The Asian continent was at the worst receiving end, where nearly 70% of some countries were underwater.
Western countries also experienced flooded roads and serious weather damage. Climatic conditions for 2023 are not expected to be better. Investors might have to rethink their investment strategies, get better insured and be cautious as to what markets they may invest as it might pertain to severe local weather’s impact on their properties.
Supply Chain Shortage
Like every other industry, several supplies are required in the real estate industry. Delays specifically in construction-related deliverables, higher costs, labor shortages, etc., can and has significantly impact the real estate sector. Most experts believe that the gap in supply and demand started way before COVID-19 and can expect to affect ongoing profit gains.
Labor Shortages
Due to a lack of qualified workers and wage issues across many countries, the availability of labor is significantly less, so the construction processes are experiencing significant delays. Investors may find it frustrating to adjust timelines and have to wait a longer time to complete projects and therefore postpone profit gains.
For example, if you decide to invest in a multifamily project in an area that has housing shortages, a delay could result because of lack of labor. Meanwhile, another competitor who may have an ample supply of qualified workers could finish another nearby project before you do. This would significantly impact your success as projected. You might even have to cut profit projections to pay more for qualified skilled labor.
Conclusion
No one can know for sure what the year 2023 will bring, but we can do our research and get prepared for the worst and other possible scenarios. Whatever the challenges, real estate is still the most reliable sector of investment where the chances for a loss are significantly less than other investment options.
