Despite the never-ending cycle of COVID surges, investment decisions can’t be put off especially with the recent rebound and innovation around multi-income properties such as SDA’s, Dual Keys, Duplex, and Coliving properties.
We’ve put together our top trends in property investing this year. In 2022, our focus is on multi-income properties where it is less risky for both short- and long-term success.
Photo: Unsplash
1. Inflation
It goes back to labor and the supply chain—there’s no one to unload freight and supplies or sell fast food.
The only way to reward labor is higher wages, which is good for workers but also inflationary and not permanent. It has always been like that.
So, inflation and volatility pricing will continue.
2. Higher Interest rates
It will continue to rise depending on inflation – Interest rates tied to inflation are not necessarily bad, and we can only hope rates will rise in an orderly way by less than a full percentage point at a time
Somewhere from 2% to 2.5% is still a good thing rather than a bad thing; you don’t want massive moves like a whole point.
3. COVID will still be there and will continue to shift the market
Many found they suddenly had a lot of options for remote work. A lot of people were jobless by the end of September last year. These massive shortages of labor are inflationary. Whether at a harbor, construction site, or fast-food restaurant, wages are higher and won’t come back down.
4. Property value – lower appreciation
We’re not in a bubble, but valuations are at the high end of their expected range. It’s a time to be cautious, use low levels of leverage and buy only assets with potential for good cash flow.
5. Regional and suburb areas will continue to boom
Continued virtual, varying, and flexible work options will accelerate the migration to states with lower housing costs, including lower taxes. A tight labor market encourages hiring remote workers outside our nation’s largest economic centers, also known as gateway cities. Housing costs are rising in Victoria and NSW—and people are moving to cities that offer a better lifestyle, and lower housing costs.
Over time, rising housing costs will moderate this trend. Affordability eventually will moderate these price distortions but can be years away.
6. Multi-income properties – good value appreciation + strong rent growth in suburbs and regional areas
There’s still a tremendous number of property investors looking to put money in multi-income properties such as SDA’s, Dual Keys, Duplex, and Coliving properties. The environment for rent growth remains strong for 2022 and properties will see modest appreciation, but it will be less than it has been over the previous 12 months.
Higher interest rates will put upward pressure on borrowing rates and cap rates, and when cap rates go higher that reduces the multiple on earnings. However, the prospect of inflation suggests that rents will continue to rise as higher wages give workers more money to spend on rent. Remote and hybrid workplace trends support suburban growth over development near the urban core.
7. Construction pace to increase
Lenders are also very interested in loaning to multi-income properties. Because development fundamentals are favorable for both equity and debt financing, and there’s so much capital to put into these investments, the pace of new construction will increase. Ultimately, as land costs and construction costs rise, property prices will rise.
Key takeaway
It pays to be cautious and anticipate future changes in the multifamily or multi-income property market.
Housing market predictions help us identify future opportunities, manage cap rates and stay ahead of trends. Despite the uncertainties, 2022 will be no different, and a positive income property will be able to maintain profitable returns.
Gil Elliott is the Managing Director and Founder of Positive Income Properties. Gil has a rich background in business consulting and property investment. All of these he gained in his nearly four decades of experience in the real estate and marketing industries.
