If you are in the market, looking for a house or some other commercial real estate during these times of crises or even if you are a seller, you might be asking yourself, how is this crisis affecting property value. We are to guide you on that.
While the lockdown caused a temporary freeze in the housing market, it was not long enough to prevent its recovery. But the occurrence of the Covid has caused changes! What are the effects of the health and economic crisis? How are the different real estate professions organized? We explain it to you.
THE DECLINE IN THE NUMBER OF TRANSACTIONS
Since the onset of the pandemic and the resulting economic crisis, many future home buyers have questioned their purchase plan, either because their financial situation has changed, or because they prefer to wait for the economic market to stabilize.
In addition, the cessation of the activity of real estate professionals during the period of confinement caused a delay in the construction of real estate programs for new housing. As the production of goods is delayed, certain purchases in the new will not take place for several months.
Finally, since the end of 2019, we have observed a tightening of the conditions for granting loans (it is necessary to have a personal contribution, to respect a debt ratio of 33% at most and finally not to borrow beyond 25 years old). Associated with the increase in loan rates, many buyers, often first-time buyers, no longer meet the necessary conditions to borrow and have had to postpone their real estate project.
Conclusion: Taking into account all of these indicators, experts expect a significant drop in sales and purchases in 2020, compared to 2019. It should last until 2021.
THE INCREASED RISK OF UNPAID RENTS
This health and economic crisis is causing an increase in the risk of non-payment. Indeed, the most precarious tenants see their financial situation deteriorate.
As for professional leases, several countries have introduced amendments to the Civil Code and the Commercial Code to allow very small businesses (VSEs) and the self-employed to postpone rents. However, these sums are due and spread over the next few months. But some professionals, whose income has been reduced, or even suppressed in the short or medium term, risk seeing the existence of their company and therefore, consequently, the payment of their commercial rent in question.
The same goes for individual jobholders, measures have been taken by their governments, to allow them to hold on to their rent money if they are short on cash. Similarly, some landlords have granted a suspension of the payment of rent and charges to their occupants, this situation could only be achieved by mutual agreement.
Conclusion: The sums due will therefore be added to the often strained rent budget of low-income households, further increasing the risk of non-payment between lessor and tenant in the post-confinement period.
THE UNCERTAIN EVOLUTION OF REAL ESTATE PRICES
Since the start of containment, there has been an average increase in the prices of goods. However, it is a safe bet that this rise, occurring during a period of anxiety and doubts, is not indicative of the reality of the market to come.
Some believe that the economic crisis caused by the Coronavirus will cause real estate prices to plummet, but then again, it is too early to tell. In a lot of countries, the trend is rather upward in property prices because of the lack of housing. In fact, in many countries, there is a rising shortage of homes each year. Due to the law of supply and demand, real estate prices in both old and new should therefore inexorably continue to rise.
Conclusion: If we do not yet know the evolution of prices, is it the right time to buy or sell? Lost experts generally agreed that the duration of the real estate market freeze has been too short and the economic recovery initiating quickly, they will not result in significant declines in property prices.
THE DIGITIZATION OF NOTARIES AND AGENCIES
Some current real estate sales could be finalized during containment. Indeed, just like any other business in a time of health crisis real estate market has also tried its best to digitize as best as they can. Most notarial offices are equipped with videoconferencing facilities, allowing them to carry out procedures remotely. As most offices have suffered from the administrative closure imposed by the government, however, the digitization of notaries is only expected to intensify in anticipation of similar events in the future.
Real estate agencies have also suffered a slowdown in their activity, in particular, due to the impossibility of carrying out property inspections. Many of them have adapted and are working on some changes in the buying and selling stages. For example, the implementation of virtual visits, in order to limit physical exchanges in this still uncertain health period.
Conclusion: The implementation of containment and, more generally, the health crisis, have forced the sector to innovate. It is very likely that this digitization of real estate professions will continue.
What future holds for prospective buyers?
While no one can say for sure what the future holds, but by studying current real estate market trends and learning from previous crises, such as the 2008 US housing crisis which affected the whole world market. We can deduce that this time housing market will not be affected as severely and prospective buyers should be hopeful.
These trends are not limited to just the personal housing market, but commercial as well. While covid has taken its toll on business in general, even then the offset it will have on commercial real estate will be short term and as the world economy starts reviving with the availability of vaccines, so will be the real estate market, as people will be eager to invest in it on the assumption that prices will be low due to the pandemic and even in general real estate is always a safe bet compared to most other businesses.