The out of the blue appearance of the whole Covid-19 pandemic and the subsequent crisis have been and continue to be a game-changer in every aspect of our life. However, while there is a clear-cut direction toward how people need to behave and maintain their lifestyle moving forward, in order to stay safe, the state of the economy and its future is anything but straightforward, especially regarding real estate.
For years, decades and centuries, real estate investment have been one of the pillars of economic growth, and now is not any different. But the economic and fiscal pressure brought on by the pandemic has created an uncertainty to the property markets worldwide—leading to some unexpected, unplanned and unique changes as well as challenges.
North American markets
So far, from east to west and north to south, all the real estate markets have been experiencing ups and downs for the last few months. Probably the most erratic — and to some extent volatile — housing market in the world, the US property market is seeing a rise in demand and price in few places all the while seeing a dramatic decrease in others. Instead of the whole market moving in the same direction, it is fragmented and being driven by economic prowess of the individual states and cities as well as the health and safety measures in place.
The state of New York is one of the epicentres of the Covid-19 pandemic and has had to dramatically scale down on the city’s capability of performing economic activities. As a result, one of the most lucrative and expensive real estate markets is going through a downturn.
The commercial real estate (CRE) market of New York has been hit particularly hard as offices continue to lay empty for months. According to experts, it can take from six months to up to two years just to reach the same position the market was in before the pandemic. While a “rent relief bill” of $100 million for the state has been introduced, it will only be for the residential rental payments, leaving commercial leasing in a dire state.
On the other hand, some real estate markets in the US, such as those in the Midwest, are not only holding strong during these trying times but are also on the quick path to recovery. The predominant “rural market” of those areas has been posting relatively good numbers even as some US cities experience a 50% drop in sales and a 50% drop in listings.Even more surprisingly, according to data from Zillow, house inventory is down by 20% from last May, pending sales are down by 9%, the value of houses is still up by 4.3%.
Similar to the US, their northern neighbouris also experiencing a confounding real estate market scenario. But for the most part, the Canadian real estate market has been faring much better. The Toronto housing market, in particular, can be said to be flourishing, even amid the crisis. There is a surplus of housing demand in the city even though sales dropped by 15.9%. As a result, home prices have increased by 7.5% year-over-year and the prices are expected to remain steady.
But overall, the Canadian market has been going through a difficult time. The chief economist of the Canada Mortgage and Housing Corporation (CMHC) stated that it may take until mid-2021 to begin the recovery.
European markets
The impact of the pandemic on the European markets ranges from mild to severe and has created a strange dish of loss and opportunity. Some forecasts state that the rental market of Europe will experience a rent drop anywhere between 2% to 10% this year. While the small to mid-sized investors are waiting for the crisis to pass over before making major decisions, the big money from big real estate investors continues to flow in many parts of Europe. Some of the transactions have been gone through, fully paid, without even physically visiting the property. The crisis has not stopped from those investors from making transactions, who believe that even a downturn will not impact such properties much.
The London housing market, which sees many foreign investments, has been slow. There has been a lot of property investment from the Middle-East in recent decades or so but now they are taking a more measured and a “wait and see” approach as property prices tumble in the UK. House prices dramatically fell in May, the fastest drop rate ever, as more and more prospective buyers refrained from closing their deals and delaying it. In just a month, the average price dropped by a staggering 7% across the UK. In the coming days, the residential price could drop by 12% while commercial value dips 15%.
Elsewhere in Europe, Belgium only saw a mild 2% drop on housing prices year-on-year,but will be quick on the recovery ahead. However, Europe’s hardest-hit nation, Spain, could take a long while to get its property market back on track. Most forecasts predict a 6% price drop in the coming days but, according to some experts, that number is very optimistic as they predict the prices will crash by up to 20% as sales plunge by 10% to a staggering 30%. This is because only 1% of pending transactions were actually completed during the first six weeks of lockdown period.
Asia-Pacific markets
The top investment destination of Asia, Singapore, has not also been spared from the effects of the pandemic. But the nation's property market has shown tremendous resiliency during and after the past economic crisis and continues to do so now. As a result of strict circuit breaker measures and safe distancing measures, many viewings fell through, purchase processes disrupted and flats shuttered. The brunt of the impact is being felt by the secondary property market of Singapore as the sale of flats plummeted by about 81% from March to May.
Despite such figures, sellers are not panic selling and the prices have actually increased by 0.1% in April and steady in May. According to some industry experts, more buyers are now entering the market and rental demands remain strong.
In the Pacific, the New Zealand real estate market is teetering on the edge sales continue to decline. The island nation had taken some of the strictest measures to come out on top of the Covid-19 situation. But that resulted in the property market to suffer a decline in sales.Even though a mild 5% reduction in sales was experienced during April and May in comparison to pre-Covid-19 situations, some economists predict that house prices may fall by as much as 15% due to the pandemic and especially if re-enforcing strict safety measures becomes necessary.
As for the Indian property market, the demand continues to stay weak even after relaxing some of the safety measures. Prospective buyers are still not inclined to move forward as fear and uncertainty grip the mind of the people. Some developers and real estate entities such as Godrej Properties have begun to adopt technology and online features to market properties to prospective buyers during the current crisis. While that has produced some positive results for residential spaces, commercial leasing is still suffering as many lease requests continue to be cancelled.
Despite the real estate market of a neighbouring country experiencing such a downturn, the property market of Bangladesh is still relatively stable. Even though there is a lack of proper numbers and figures that correspond to the current state of the country’s local real estate condition, industry experts say the prices, demands and supply seem to negatively unmoved.
There has been a reduction, greatly so, in the number of properties actually being transacted, even though there are still many property requests, viewings and booking taking place regularly. Property prices, for now, remain unaffected. But as the economy continues to reopen little by little, the question of how long will the real estate market remain in this “unmoved” state arises — especially since the health condition slide downward — as well as will the coming days produce new opportunities.
