Why Resilience is Now a Necessity in Real Estate

Periods of uncertainty and unpredictable price movements are nothing new for commercial real estate markets. In the last few years, however, the risk threshold has not only widened but also deepened. Massive issues, from public health to international politics, continue to plague the industry, at times chipping away at progress.

Now discussions about resilience are taking centre stage. Being resilient is not just a concept stakeholders must deal with, but a necessary quality that allows real estate markets to rise above challenges.

Areas of Concern for Real Estate

The following pose a serious risk to the real estate sector and should be addressed immediately:

Climate Change

As weather events grow more severe—wildfires burning whole forests, hurricanes destroying towns and cities, and rising water levels leading to flash floods—property markets are finding it difficult to stay resilient. Despite comprehensive insurance coverage for climate change effects, premiums are rapidly going up. Investors have become more picky, zooming in on adaptable properties that are strong and flexible enough to handle the impact of severe weather conditions.

Upcoming laws, policies, treaties and international agreements on climate change may also affect real estate as a whole. The industry is responsible for nearly 40% of carbon dioxide emissions around the world due to building constructions.

High Inflation Rates

When prices surge, it is inevitable for interest rates to go up as well. Experts predict an impending economic slowdown that may impact the Canberra property market, resulting in higher mortgage rates, construction costs and rental prices. Inflation strains the rental market as it prevents renters from buying their own home. At present, residential and commercial properties continue to be in demand, but unemployment rates are rising and household income is decreasing.

Fraudulent Transactions

Although such transactions were commonplace long before the pandemic, off market activities have increased in recent years, exacerbated by global health concerns. As long as a licensed broker or real estate specialist oversees an off-market property purchase and the buyer goes through authorised channels, the transaction is considered valid and legal. Unlike publicly listed properties, however, in an off-market transaction, buyers do not have to endure all the formalities of bidding and wait until they land a good deal.

Much as they provide better alternatives to time and budget-challenged buyers, off-market deals are prone to fraud. Unauthorised transactions and illegal real estate operations are growing by the minute. Fraudulent practices like selling low quality or unassessed homes at high prices and selling a property while intentionally not disclosing its defects or maintenance problems have left many developers and buyers at a disadvantage.

Resilience as a Conscious Choice

Gone are the days when resilience was merely an option. In today's real estate market, the negative impact of climate change, inflation and fraud are clear and palpable. In the past, property investments in Canberra and elsewhere were thought to be the price a buyer must pay to achieve sustainability and efficiency later on. But resilience is not about sacrificing one thing in order to get another. It simply means making a proper response to the challenges of the real estate sector.

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