The real estate market is trying to get a positive reading of the health crisis and the economic blow that is expected from the coronavirus. Despite the fact that purchase and sale operations have been paralyzed and experts assume that housing will not recover normal activity at least until the end of the year, the sector remains optimistic and trusts that the covid-19 will bring some positive changes .
That what sustains the network Buy house, made up of 150 real estate agencies spread across Spain and Portugal and which has sealed more than 120,000 transactions in its two decades of activity, which has summarized in a study the ‘good habits’ that could settle on the brick. Among them is the explosion of technological tools, buyer empowerment, low interest rates and the increasing professionalization of the sector.
We summarize what details of each of them:
1. Price drop and buyer empowerment
The network considers it inevitable that we will see a drop in the price of houses, in line with the theory they have held since Century 21. The reason? This crisis will force many to have to lower the price of their homes to adapt them to the new circumstances, especially if they want to close the operation as quickly as possible.
The market is already considering a decrease of between 10% and 15%, although everything will depend on the depth and duration of this crisis, but what Compracasa is clear about is that “we are facing months in which the buyer will have the word”.
2. Interest rates will remain very low
Another good news is that, to face the crisis, central banks around the world and provided there is no pressure from inflation, will maintain accommodative financial conditions. Thus, interest rates in the euro area could remain at the current historical lows of 0.0% beyond 2022. Therefore, the interest on loans to families and companies will continue low and the 12-month Euribor, the indicator of reference for most mortgages in Spain, will not rise strongly.
“This lowering of mortgages and the fall in financial markets lead us to think that the sector will continue to be one of the most interesting assets for investors, and that the impact on the middle and high segment of the real estate market will not last long”, they add from Comprarcasa.
3. A safe haven in times of uncertainty
The study recalls that, as has happened in the past, once the most critical moments have passed, the recovery in this sector is always very strong, even higher than expected. Furthermore, the volatility that is hitting the financial markets, added to the forecast that the era of ultra-low interest rates will lengthen, “leads us to believe that the real estate sector will continue to be an interesting destination for investment,” he insists.
4. Explosion of technological tools
This period of confinement will also be a catalyst for the sector to increase its commitment to technology and new digital tools. “Many real estate professionals are taking advantage of this break to train, update their tools, strengthen relationships with clients thanks to technology …”, adds the study. For example, both virtual visits to homes and the formalization of deposit contracts or payment of the signal electronically are growing.
5. Many vacation rental homes will change use
There will also be a shift from the holiday rental market to the traditional market due to the expected setback in the tourism sector, which would allow an increase in the supply of long-term rental flats available on the market. This increase will be accompanied by “a natural downward adjustment in prices,” emphasizes the network.
6. Professional rental management will continue to grow
Comprarcasa believes that the package of measures approved by the Government, which distinguishes between large and small owners, “will undoubtedly be of great help to tenants in vulnerable situations.” In addition, the large holders have also brought their own contingency plans to the most vulnerable tenants in these difficult times. “This fact leads us to think that lProfessional asset management enables a more efficient response than that of private owners, and that this trend will consolidate even more after this crisis “, insists the study.
7. Only the best will survive
As in the other sectors of activity, the most prepared companies are the ones that will best recover from the economic blow, while the weakest are in danger of disappearing. “The technology that real estate agents have, continuous training, network operations, complementary services, financial tools and the strength of their brand will make the difference between surviving or not,” the study adds.
8. Delay in rental measures criticized by the sector
The expansion of the epidemic at the moment has left one of the Government’s star measures in the air: control rental prices. Despite the fact that the Ministry of Transport, Mobility and Urban Agenda (Mitma, the former Development Department) had planned to present the rental price index in the first quarter, the measure has been postponed. The objective of Minister José Luis Ábalos to bring to Congress an “initiative to allow the control of rent prices in those areas that have experienced exorbitant increases” is also delayed.
Both measures have raised criticism both in the opposition and in the real estate market. In fact, national and international organizations, economic experts and the sector have been warning for some time that establishing a control of rental prices can be a counterproductive measure for the rental housing market itself.
9. The need to rethink architecture and urbanism
Finally, the study emphasizes that “it is very likely that the traces that these weeks of confinement leave us, with the phenomenon that arose from ‘the balconies’ and neighborhood coexistence, provoke a deep reflection on the houses that are built in the very near future. “
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