As we slowly start to put the Covid rollercoaster behind us, there are new factors for investors to think about when it comes to hotels and properties. Among others, the rise in inflation and growing interest rates – what will this mean for these markets in 2022?
Research carried out by one of the world’s leading property agents Savills draws on global real estate trends over the last three years.
While the pandemic posed a significant threat to retail and office sectors, residential properties have thrived, and this is expected to continue this year. Also, despite the initial plunge, hotels are bouncing back as the world starts to re-open and people re-gain confidence in travel.
The property boom: where are we now?
As the Covid-19 crisis began, new government guidelines and lockdowns introduced working from home for many office-based companies. Interestingly, the Savills report outlines that some parts of Asia and the Middle East are still seeing pre-pandemic styles of office working, however for many western countries, working from home or hybrid working has become the norm and may become permanent. In the US, for example, the volume of employees working from home soared from just 8% in February 2020 to 35% in May 2020, and in many European countries, it’s been found that roughly 28% of jobs can be carried out from home.
Steve Coulson, co-founder and chief executive of Kitt Offices, comments that “The ‘where of working has becomes less important than the why”. On that basis, professionals have found themselves migrating from large cities to rural towns, helping to cut back on costs and upgrade on general quality of life.
To shed some perspective on what this migration means, the US recorded the above gains and losses in population across a range of areas. Larger cities such as New York, Brooklyn and Chicago took significant hits to their population count in 2020. New York in particular saw a 487% increase in movers, while smaller town like Katy and Richmond in Texas took the top two spots for population gained.
Similarly, a Rightmove survey found that the UK experienced a rise in popularity of rural and coastal towns like Cornwall as people began leaving larger, busier cities at the start of the pandemic. Cornwall’s rapidly-growing popularity managed to close what was a 49% gap in property searches versus London in 2019, to just 3% in 2021, knocking the capital off first place for a while. Likewise, Savills highlight that there is “potential in secondary cities as occupiers seek more affordable, liveable places”, with the view that demand in this area will remain.
How have property prices been impacted?
Globally, house prices increased at a 16-year-high pace with the eruption of the pandemic. The global house price index by Knight Frank highlights the following key statistics (year-to-date to March 2021):
· Turkey saw the highest rate of annual price growth (followed by New Zealand, Luxembourg, Slovakia, and the US)
· There was an average increase of 7.3% in prices across 56 countries
· 13 countries registered double-digit annual house price growth
· The US reached its highest annual price growth since 2005 with +13.2%
· In New Zealand, the annual rate of price growth peaked at +22%
However, countries like Italy (1.6%), India (1.6%) and Spain (-18%) all recorded much lower price growth rates for reasons such as tighter lockdown measures and excess supply.
With an upward trend since 2020, house prices are expected to continue to rise this year, so this could be a good time to consider investments in residential property. For the UK, Zoopla’s Head of Research Gráinne Gilmore explains that there is a “continued drumbeat for more space” despite the country’s 7.3% increase in house prices year to date to June 2021. As lockdowns stripped the need for flats, buyer demand rocketed to +80% last year (vs. 2017-19) and home-seekers began showing a continued interest in up-scaling their residential space, both inside and out. Gilmore concludes that this is expected to continue to drive demand in 2022.
The rise of hotels in a post-pandemic world
There is no way to sugar-coat it – hotels and the hospitality sector have been hit hard by Covid. The introduction of lockdowns and travel bans in 2020 led tourism to its “worst year” yet, and while industry experts expect a long road to recovery, many show a positive outlook for progression and opportunity in 2022.
Based on National Statistics, the beginning of lockdowns in early 2020 led to 25% of all furloughed staff in the UK to be in the accommodation and food service sectors. However, the industry adapted to mitigate some of the impact and temporary business closures fell by over 50% between spring 2020 and early 2021.
Based on current statistics, there is an emerging trend in growing labour vacancies, suggesting that the sector is recruiting and in recovery.
In the UK, job vacancies in the accommodation and food services have surpassed a two-year high in just one quarter. This upward trend is expected to continue in 2022, showing confidence in the sector’s readiness to accept customers again.
On a global scale, industry experts remain cautious about how and when the hospitality and tourism industries could fully recover, but there is optimism for the rest of the year ahead as people start to feel more confident about international travel.
The World Tourism Organisation (UNWTO) reported that, by the end of 2021, the global travel industry experienced 4% growth compared to 2020. The strongest improvements were seen across Europe and the Americas, which recorded +19% and +17% growth respectively. On a more granular level, the Caribbean outperformed other regions by reaching +63% growth.
This all leads to a healthy outlook on how things will progress this year. UNWTO reveal that 61% of tourism experts are optimistic about the industry seeing further growth this year, and nearly 60% say that they expect it to bounce back.
Propiteer Capital hotel and residential projects
At Propiteer Capital, we are able to meet this growing demand with our extensive portfolio, which covers a range of hotel and residential projects across a variety of in-demand areas in the UK and Ireland.
One our most recent property developments, which is on track to completion later this year, features luxury new-build homes across 72 acres in Brizes Park in Brentwood, Essex. The historic grounds will offer a range of property types and sizes to suit different needs, surrounded by beautiful countryside views.
On the hotel front, this year will also see the innovative Hampton by Hilton hotel in Duxford come out of planning ready to start work on the development. Home to Europe’s largest air museum, Hilton Duxford will bring exceptional service, originality, and opportunity for both tourism and investment.
If you’d like to find out more about getting involved in the improving hotel and property investment markets, visit our website.
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