Interest rates are coming down, notably in the UK and the US, spurring a drop in mortgage rates. This phenomenon is sending ripples through the global housing market, reshaping the dynamics of affordability, demand, and investment opportunities. We explore the impact of lower borrowing costs and highlight the global property hotspots poised for growth.
Increased Affordability: Opening Doors to Home Ownership
The most immediate consequence of lower mortgage rates is the increased affordability of home ownership. With reduced monthly payments, both first-time buyers and seasoned investors find themselves with more purchasing power. For first-time buyers, lower rates present a move in the right direction for their first step onto the property ladder. Investors, on the other hand, are presented with opportunities to remortgage at lower rates and expand their portfolios.
Stimulated Buying Activity: From Side-lines to Sales
Lower borrowing costs serve as a powerful incentive for potential buyers, propelling them off the sidelines and into the housing market. In the UK, where rental demand has reached historic highs accompanied by UK rents rising by 9.7% in the last year, lower mortgage rates are opening doors to more rewarding rental yields.
As borrowing becomes more attractive, mortgage applications surge, increasing activity within the property market. This uptick in demand translates into increased home sales and property values, fostering a more dynamic real estate landscape.
Opportunity Growth: A Boom for Investors
For investors, lower borrowing costs present a myriad of opportunities. Markets poised to benefit from decreased rates include those with strong job growth and demonstrated resilience through economic shifts. This period represents an opportune moment for investors to expand their portfolios, capitalising on favourable market conditions. Moreover, refinancing existing properties allows investors to leverage lower interest rates, optimising their financial positions and maximising returns.
Global House Price Growth
From the property hotspots of Latin America to the cosmopolitan allure of Miami, the global real estate landscape is teeming with opportunities for investors and homebuyers. Lower mortgage rates, coupled with increased affordability and stimulated buying activity, are reshaping urban environments and putting healthy upward pressure on house prices.
In North America, Miami shines brightly with its strong prospects. Comparatively low prices, an appealing climate, and low taxes will support Miami’s future price growth. Currently, Miami boasts a 3.2% change over three months and a 5% change in the 12 months to Q3 2023, according to Knight Frank’s Global Residential Cities Index.
Within Europe, Lisbon is a prominent real estate market with favourable mortgage conditions. The city captures the essence of cosmopolitan living, luring discerning buyers to its historic streets and sun-kissed shores.
In Latin America, Mexico City and São Paulo are experiencing a surge in demand, fuelled by urbanisation and economic growth. Mexico City showcased a 1.5% change over three months and a 6% change over 12 months, while São Paulo marked the biggest year-on-year rise in over 7 years with house prices increasing by 5.19%. These cities are exhibiting significant price appreciation and attracting buyers looking for strong long-term investment returns.
A shift towards accessible homeownership, combined with healthy price growth in vibrant real estate markets worldwide, is welcome news for those looking to invest in real estate. As investors reassess their financial situations and look to the future, global property hotspots are gearing up for increased interest and further growth.
The decision of whether to invest in real estate requires careful consideration. Some investors may choose to buy now at higher interest rates, hoping to generate capital growth as affordability returns and housing markets see an uptick in activity. The other option is to wait until rates have dropped lower, but prices haven’t yet rebounded. It is a tough balance and something everyone should consider carefully based on their own circumstances and the market they plan to invest in.
By investing in off-plan property, buyers can lock in today’s prices while potentially capitalising on lower rates when the project is completed. Consider the unique opportunity to invest in one of our Florida homes, where we extend the offer of today’s prices coupled with a unique two-year deferred plan. This option provides the flexibility to secure your dream property while mitigating immediate financial obligations.
Whichever path you choose, it’s vital to approach real estate investments with careful deliberation. Get in touch with our team for professional guidance and investment opportunities across a range of global markets.
Contact us today to discover investment opportunities in global real estate.