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July 11, 2023 • 15 mins
In this episode, Parth & Abdul dive deep into the value drivers behind the Real Estate market and discuss the key trends impacting the future of the industry.
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Episode Transcript

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(00:00):
Good afternoon, ladies and gentlemen.Welcome back to the Investors Daries podcast,
where we help you work smarter andharder by providing weekly market updates and insights.
We're back again this week with ourregularly scheduled podcast and today's main topic
of interest it will be the realestate market and its dynamics, as we
have a podcast scheduled with a realestate expert in the coming weeks, So

(00:22):
hopefully this episode will give you abasic understanding of the invisible forces impacting the
real estate market and better prepare youfor the guests interview that will be conducting
with our real estate experts. Soif we have an extended episode in store
for you, and we will delvedeeper into the Australian real estate and market
and discuss some global trends. So, Abdul, how are you today and

(00:42):
let's dive right into it. Yeah, great, I'm feeling good. What
is good today? I'm really excitedto dive deeper into the global outlook for
real estate and discussion and discuss itsimplications for investors. Absolutely, So before
we continue, let's provide the listenerswith a slight overview of just the outlook
of the real estate market in twentytwenty three and just forecasts for the future.

(01:06):
So can you walk us through athough just the key trends in the
market. Sure? So. Accordingto our research, the ongoing recovery in
the global economy is driving demand forreal estate. With GDP growth expected to
be above trend in twenty twenty three, we can anticipate increased demand for both
commercial and residential properties. Additionally,rising inflation, expected to average around four

(01:29):
percent, will put upward pressure onrents and property prices. Despite rising interest
rates, they are still historically loomwith the US Federal Reserve projected to raise
rates several times, but they areexpected to rein below three percent. Furthermore,
limited supply in the real estate marketis supporting higher prices due to constrain
new construction. That's definitely some interestingnumbers and statistics are you throughout there?

(01:53):
But for now, let's focus onthe outlook for twenty twenty three. What
can we expect for the global realestate market in the coming year. Yeah,
so, based on identified trends ourresearch, you know, we found
from our research is that the globalreal estate market will continue to perform to
perform well in twenty twenty three.However, it is important to acknowledge the

(02:15):
presence of potential risks, such asthe possibility of recession. You know,
we discuss a lot in previous episodes, rising interest rates, and geopolitical tensions,
and these factors could impact the market'sperformance and require careful monitoring. Yeah
yeah, And while the outlook isgenerally positive, it's crucial to remain mindful

(02:36):
of potential risks. So let's divea little bit deeper into some additional just
key bullet points that we figured out. So some things we learned was that
the US real estate market is expectedto outperform other markets in twenty twenty three,
and if the US economy projected togrow at a faster pace than other
developed nations, we anticipate increased demandfor state in the United States. And

(03:00):
additionally, and interestingly, the AsiaPacific or APAC region is expected to be
the fastest growing real estate market,driven by its large and growing middle class
economy, which contributes to increased demand. Another noteworthy sector that we found out
was logistics, which is predicted tobe one of the best performing sectors in

(03:23):
twenty twenty three, and the reasonfor this is the rapid growth of e
commerce which is driving the need foradditional warehouse space right and these insights offer
valuable guidance for investors. However,let's not forget about the risk highlighted in
our research. What are some potentialrisk that investors should be aware of?
Absolutely so, while the global realestate market is anticipated to perform well,

(03:46):
as I mentioned earlier, it isessential to acknowledge that there are always risks
involved with any sort of investment inany sort of asset class. So one
notable risk, probably the biggest,is the potential for a recession. A
global economic downturn or a global recessionwould result likely in a reduced demand for
real estate. And additionally, risinginterest rates which would be rising due for

(04:12):
tackling inflation, could increase borrowing costswhich could further dampen demand. And just
other geopolitical tensions such as ongoing conflictsin Ukraine, Russia and etc. Could
it disrupt the global economy and impactthe real estate markets negatively excellent points,
and you know as investors it isessential to stay informed and consider these risks

(04:33):
when making investment decisions. Could youjust conclude now to listeners back home?
The conclusions drawn from all of ourfindings. Yeah, so, I'd say
overall, what we found is thatthe global real estate market is emphasizing positive
performance expectations for the coming year.However, as just mentioned, it is

(04:55):
crucial for investors to be aware ofthe identified risks and exercise big a lot
of caution. By staying informed,conduct thorough market research, seek professional advice
from realtors, it will be easierand better for investors and they will be
easy to be able to navigate themarket more effectively and make well informed financial

(05:15):
decisions. Some wise advice. Now, let's provide our listeners with some practical
recommendations that we've come up with.Could you start with sober recommendations for listeners?
Yeah? Sure. So the reasonwe're giving you some practical recommendations is,
first we want to outline that thisis not financial advice. What we
have noticed is that a lot ofpodcasts or doc YouTube videos will give you

(05:38):
advice theoretically, and we want toessentially give an outline of how you can
actually implement this information in your practicaldecision making. So here are some recommendations
that we would personally employ in ourpersonal life. So firstly, focus on
sectors that are expected to perform well. That includes logistics as we mentioned,

(06:00):
and other sectors include healthcare and residentialsectors. And these sectors have demonstrated strong
growth and present potential investment opportunities inour opinion. And then other than that,
you look at markets in general thatare projected to growth. So as
we discussed the US market, theAsia Pacific or a pack market, as
well as the Latin American or Latanmarket, these have been highlighted as regions

(06:23):
with growth potential in the real estateindustry. So investors should evaluate these markets
based on their risk tolerance and investmentobjectives and etc. So just being mindful
of the risks we outlined earlier andjust be informed on potential recessions, rising
interest rates, and geopolitical tensions andassess the potential of these impacts based on

(06:44):
the specific regions that you're looking intoas well as the specific sectors that you're
looking to invest in. Excellent recommendations. These insights provide valuable guidance for our
investors looking to navigate the global realestate market. Wait, so I just
want to interrupt you here. Sowe've been talking about the real estate market,
So can you continue the discussion abit and talk about the dynamic intersection

(07:05):
and relationship of climate change and realestate. All right, let's get into
it, um. Climate change isundeniably exerting a significant impact on the real
estate marketing. Rising sea levels,extreme weather events, and other consequences are
are rendering some properties less valuable andeven uninhibitable. Coastal properties, for instance,

(07:30):
face the risk of flooding, whileareas prone to wildfires are under the
constant threat of destruction. So part, could you elaborate on the specific impacts
of climate change on the real estatemarketing? Certainly so. As you mentioned,
rising sea levels are already impacting coastalproperties, and this concern is expected
to just continue intensifying in the future. So low lying areas or properties near

(07:53):
the coast face the most imminent dangerof flooding, which can lead to complete,
substantial damage or loss of homes andbusinesses. In addition, climate change
is causing a surge in more extremeweather events such as hurricanes, floods,
of wildfires, just the example ofthe Australian wildfires just two years ago.
And these calamities not only inflict physicaldamage, but also contribute to making certain

(08:18):
areas less desirable for living and hencedrive down real estate prices for the more.
Changes in precipitation patterns, which isthe rain patterns resulting from climate change,
have led to areas experiencing either increaseddynas dryness or heightened precipitation or rain.
And these shifts can impact water availabilityfor agriculture activities and make other areas

(08:43):
more susceptible to wildfires. And finally, it's also important to note that climate
change can disrupt transportation and infrastructure,which can make it difficult to access and
sell properties. So flooding, forexample, can damage roads and bridges and
hamper connectivity from certain areas from onearea to another. So, though,
my question to you is we've talkeda lot about the impact of climate change

(09:07):
on real estate and the potential negativeeffects it can have and has been having
over the last couple of years,and it's projected to have. So what
recommendations would you offer to real estateinvestors who are concerned about the impact of
climate change? Great question. Firstand foremost is essential for investors to thoroughly
research to potential risk posed by climatechange. Part you did highlight a few

(09:30):
of them in you know your areaof investment. Understanding the specific location and
its vulnerability to climate related disasters iscrucial. Investors may also want to consider
investing in properties that are most resilientto climate related disasters, such as those
situated on higher ground or constructed withmaterials resistant to fire or flooding. Lastly,

(09:54):
stay well informed about the latest developmentsin climate change and its implications for
the real estate market. It's vitalto in order to make a informed investment
decision. Those are some very wisedrecommendations up though. So now we've covered
a quite a bit about the impactof climate change and the real estate market,
so they yet a little more broaderand shift our focus to the future

(10:18):
of the real estate market and industry. So, while certain uncertainty prevails,
there are several key trends that willinevitably shape the industry moving forward. So
ODO can you provide our listeners withsome insight into what these trends are right,
So, one prominent trend is therise of remote work. The COVID
nineteen pandemic has accelerated adoption of remotework and this trend is expected to persist

(10:43):
in the years to come. Theability to work remotely enables individuals to choose
more affordable areas to live, potentiallyleading to increased demand for real estate in
rural and suburban regions. Another significanttrend is the growth of e commerce.
With booming e commerce sectors sector sectors, there is a corresponding surge in demand
for warehouse space. E Commerce retailersrequire warehouses for product storage and shipping,

(11:09):
making the demand for warehouse facilities likelyto continue its upward trajectory. Additionally,
the Asian population is another key factordriving the real estate marketing. As the
population ages, there is an increaseddemand for retirement homes and assisted living facilities,
presenting opportunities for growth in the sector. YEA, thank you for outlining
those trends out though. But anothersignificant trend that we just can't not talk

(11:31):
about is the impact of climate changeitself. And I know we just talked
about how it has impact the industry, but we should also focus on how
it will continue to impact the futureof the real estate market moving forward.
So, as we discussed earlier,some areas may become less desirable due to
the heightened risk of climate related disasters. Conversely, areas that are less affected
by climate change may experience increased desirabilityas individuals will seek safer location. So

(11:58):
this shift in preference may result inchanging property values and investment prospects based on
further geographically located Absolutely part the realestate market is undoubtedly a dynamic landscape continuously
influenced by various transit factors. Anothertrend worth mentioning is the rise of smart
homes. These these technologically advanced residencesare equipped with features that allow homeowners to

(12:22):
control their homes remotely, such asthermostats, lights, and security systems.
Smart homes provide enhanced convenience, energyefficiency, and security, and the demand
for them is expected to continue togrow, and that's a very important trend.
Additionally, on just building on topof that, we can't overlook the
growing importance of green real estate.With environmental concerns at the forefront of everything

(12:46):
we do today, properties are designedto be environmentally friendly, are and are
these properties are gaining momentum in theindustry. Green real estate encompasses homes constructed
with sustainable materials and equipped with energyefficient and impliances as some of the appliances
you mentioned earlier, and as individualsbecome more conscious of their environmental impact,

(13:07):
the demand for green real estate islikely to experience sustained growth. Investing in
sustainable properties not only benefits the environment, but also offers long term cost savings
and potential market advantages. Precisely,lastly, let's highlight the increasing importance of
location in the future real estate market. Individuals are increasingly seeking homes that are

(13:28):
convenely situated near amities and transportation options. This emphasis on location becomes particularly pronounced
in urban areas where space is limited. As a result, property and highly
accessible and desirable neighborhoods are expected toremain high in demand. And thank you
for emphasizing the significance of location outthough I'm sorry I didn't cover that earlier.

(13:48):
But as we bring this episode toa close, it is evident that
the real estate market is a verycomplex and ever evolving landscape. By understanding
the key trends shaping the market,investors can make informed decisions about where to
allocate their investments. And so,just to cover a few things that we
went over today, we ready diveddeep into the real estate market and discussed

(14:11):
the forces that impact the prices andthe value drivers behind the real estate markets.
APT do you just want to giveus a yes. Yeah. Quick
summary. You know, we diddiscuss you know, market trends, sustainable
and green real estate and real estatefinancing and have mortgages in the context of
the Australian market. We do thankyou for tuning in with us for yet

(14:35):
another episode of the Investors Diary podcast. You know, as you know part
alluded to in the intro. Wedo have a guest interview lined up so
we hope to draw upon our conversationstoday and ask you questions from a professional
so that's been in the field formany years, uh and you know,
you know, and pick his brainand see what he has to say about,
you know, some of the thingswe've discussed. So thank you for

(14:56):
listening and peace. Peace,
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