But of course, a home is more than that these days. The increase in hybrid working is palpable in many countries now, particularly in the US where the transition away from full-time office work appears the most noticeable, including full remote working for an increasing number of employees.
Research from McKinsey last year revealed that 35% of US employees now have the opportunity to work from home full-time, while a further 23% can do so part-time. So, with more than half the workforce having some degree of flexibility, this is encouraging people to move home seeking to improve the area they live in, increase the size or quality of their accommodation, lower their cost or a combination of these factors.
Reading this and much of the commentary from last year would result in a perception that everyone has moved south in the US, with an idyllic view of an employee tapping away on their laptop in-between dips in the pool to cool off. And indeed, the migration data would support this, with Florida and Texas for example witnessing significant population growth.
Follow the people to follow the profit? Well, not necessarily. While purchase values have fallen since last summer across the US, they remain among the highest in the south, ie a lower yield on acquisition price. But at the same time, affordability is starting to bite in many of these markets. Residents can only cope with so much double-digit rental growth before they wave the white flag.
More than half the households in Miami use more than 35% of their income on housing, while in Atlanta, Houston, San Antonio and Tampa, it is more than 40% of households. Affordability is becoming a real issue, particularly with households tightening their belts as economic turbulence builds.
The highest purchase yields are to be had in the Midwest, but they have also recently been delivering the highest rental growth. Tenants are attracted to the value that the states of Illinois, Indiana and Ohio offer and are starting to drive the rents up, with Apartment List reporting at the end of last year that Indianapolis recorded the highest multifamily rental growth in the last 12 months, with Chicago, Cincinnati and Columbus not far behind.
And of course, while 58% of US employees have the option to work at home at least part of the week, that leaves 42% who do not, with the Midwest having a significant employee base, including significant levels of agriculture, manufacturing and logistics. While people can move, the land and its resources cannot, with Midwest providing many of the raw materials required in production and then being the most centrally located to distribute them across the US.
So, there is nothing wrong with the middle. In fact, the Midwest may offer some of the most attractive multifamily investment opportunities for Islamic investors. Expect to see less palm trees in future acquisition announcements.
Written by Philip Churchill, first published in Islamic Finance news Volume 20, Issue 7 dated 15th February 2023.