Rental Property Market Forecast

30 March 2020

The important skill of every real estate investor is to see two steps ahead. To plan out the perfect investment strategy and choose the appropriate time for the purchase, the homebuyer needs to conduct research on the possible changes in economic conditions in the nearest future. 

Real estate investing often includes an element of fortune, like gambling, but much of the success of investing depends on the skill to make predictions using the previous knowledge. Further, we will review some predictions for 2020 rental property market, based on the outcomes from the previous years. 

The Increase of the Rent Prices

A recent piece of research shows that the price of the rent increases to 3.3% from year to year, and the trend for growth is expected to continue in 2020. The main reason for this tendency is the supply and demand ratio. 

Due to the rapid growth of employment possibilities, the number of potential homebuyers, who are typically millennials, experienced a great increase, while the quantity of the housing supply remained the same. The gap between housing options and the number of solvent young people created the buyers’ market in such U.S. cities as Nashville, Austin, and Raleigh. 

The growth of housing prices leads to a larger number of people tending to choose the option to rent a property instead of buying. Then the same tendency, as with the properties for sale, occurs in the rental market – the disproportion between the number of renters and the supply of the properties results in the growth of the prices. Thus, this is great news for the owners of real estate for rent and an opportunity for higher income.

money and a house
money and a house

Gen Z’ers and Millenials Will Rent In High Numbers

The growth of the demand for housing affects not only the millennials, who are now the largest part of the target audience for landlords, but also people from generation Z. Gen Z’ers are now entering the rental market, and in 2020 they are expected to be the active part of renters, along with the millennials. For this reason, the real estate industry will have to adjust to the needs of this emerging generation.

There are many factors that influence the reason for such behavior. For some people from generation Z, rent is a great option to try various living opportunities within the same city, for others, this is a chance to put some money aside for the purchase of their own house or apartment in the nearest future.

New Housing Construction Boom

In December 2019, the number of new construction homes has increased by 16.9%, which is a new record since the year 2006. This was made possible due to the greater availability of mortgage financing and the positive expectations of consumers about the economic conditions in the country.

2020 is the high time for the home builders and real estate dealers due to the pool of interested homebuyers who are willing to purchase either a residential or commercial real estate. If we consider the residential sector, then the most suitable options for first-time buyers are modestly-priced homes that require the affordable amount of finance for the down payment. 

The Positive Influence of Technology on Tenant-Landlord Relationship 

The digital age affects all sorts of areas of our lives. Modern technologies have drastically changed the everyday communication and make life a lot simpler for realtors, real estate agents, investors, and homeowners.

Now it is easier to make transactions, pursue negotiations and attract more renters and buyers via social media marketing activities. Real estate agents create virtual tours of the house to make the showings for potential tenants. The 3D tours are also more informative than the photos and allow to get a better picture of the rental property. Also, this approach saves a lot of time for renters and real estate agents because they are not supposed to visit the dozens of houses in person before signing the contract.

The competition in the real estate market is rapidly gaining momentum, that is why the landlords are required to offer high-quality services to the tenants to stand out from competitors. The high tech tools are very useful in this regard, because they help to improve the communication between the landlord and the tenant, especially if the rental property is a great distance away from the homeowner’s residence. For instance, a tech-savvy landlord may use such online tools as online rent collection or maintenance tracking to simplify these procedures.

Rental Property Market Forecast 1

Gentrification as a Trend in Fast-Growing Cities 

Gentrification, which is the process of reconstruction and renovation of the houses in the urban areas by wealthy people, is one more trend emerging in the year 2020. 

A short time ago gentrification was considered to be a negative tendency. It was often associated with the eviction of the original residents and worsening their living conditions.

Despite the fact that gentrification makes it more difficult for middle-class home buyers to purchase houses in some areas, experts in urban planning claim that this process has positive consequences for the long-time city dwellers.

The process of gentrification is an indicator of economic growth. It affects the overall view of the city – renovated parks and buildings. Also, gentrification has the following benefits:

  • the increase in the employment rate due to new service and retail businesses;
  • the rise of new-home construction activity;
  • the decrease in the crime rate. 

Conclusion

As we can observe from the forecasts, the real estate investors will face the positive changes in the rental market in 2020. The demand for rental properties is growing steadily and this year will be no different. 

The investors and homeowners need to pay their attention to the major groups of the potential renters – millennials and people from generation Z. Then, based on this information, it is easier to plan the marketing strategy focused on these categories of the tenants. In addition, the landlord should not overlook the use of technological tools that may be helpful in maintaining a positive relationship with the tenants.

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