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Short-term and long-term forecasts for real estate business in the pandemic

Short and long term forecasts for real estate business in the pandemic

 

Every industry was influenced by a coronavirus, but in comparison with the beginning of the pandemic, now we can observe almost complete shutdown of many businesses and real estate, in particular. It was not difficult to predict that both sales and the number of new listings would face a significant drop in the number. However, if the beginning of the pandemic has discouraged almost 80% of buyers and they decided to take a pause, in two weeks, this number has reached 100% already.

Consequently, real estate agents can experience the negative effects of the pandemic in all sectors of the industry. The most significant drop in sales is in the entertainment and vacation areas: the demand for restaurants, hotels, bars, stores has almost disappeared. The second worst impact is on the luxury property and second-hand homes. Many people who planned to buy homes are puzzled if they should continue doing that or it is better to wait for the decline in the number of infected people. When will the market revive and will it happen this year? What should real estate agents get prepared for? There are many questions left unanswered, but the point is the following: it is necessary to think long-term and change the customary approach to work at the moment to survive in the current crisis.  

 

Regional difference

 

Despite the fact that the whole planet has suffered from Covid-19, there is still a great difference in the numbers. If to compare the area of China and Italy as well as the number of sick people and deaths, we can see that there are significant regional differences. The same can be spotted on the example of the US where the highest outbreak of the infection is in New York and the rest of states can see a much slower distribution of coronavirus. Therefore, there will be a regional difference in the outcomes of this crisis too. Currently, many US experts suppose that such states as New York, Florida and Texas will suffer the most. If the pandemic does not decline by summer, it is predictable that no tourists will arrive to Florida and it will suffer from great financial losses because of that. Texas, for example, will also experience the economic disruption caused by low oil prices that have dropped dramatically recently. Every region will be influenced by the pandemic and it is difficult to predict to what extent, since nobody can say for sure when a ‘stay home’ period will finish.

 

Prospects for housing and home building

 

Builders of new homes have also been influenced by the situation that has taken the whole globe by storm. They not only do not have buyers but also experience troubles with suppliers from China and other countries. The US builders use over 30% of materials produced in China and 54% of people surveyed admitted having problems with receiving materials. Both these consequences of coronavirus will result in slowing down business development and the purchase of land. 

One more important thing to remember is a crash that took place in the stock market. Many people who planned to buy homes for their investments now can only dream about that. 

Speaking about rent, not only tenants will ask for forbearance from their landlords, but the last ones will have to do the same if they depend on lenders too. Moreover, it would be more difficult to find new tenants during this period. The inability of tenants to pay for housing because of job losses may lead to the increase of empty homes offered for rent and it would be necessary to lower rent prices significantly to attract reliable tenants. However, experts still predict positive rental trends for the future, so it can be only a temporary difficulty.

 

Real estate business: commercial property

 

real estate business

 

It is clear that modern small and middle businesses can hardly generate only a small percentage of their traditional income and it may lead to requests in rent relief too. Moreover, it is difficult to predict how long these businesses can survive without a standard number of clients and long-term social distancing can lead to the bankruptcy of many of them. As a result, the number of commercial properties offered for rent and sale will increase. However, many experts predict that most of the retail shops, bars, restaurants will be able to overcome difficulties and restore their activity.

Let’s look at the offices close too. It is natural that many companies were forced to work from remote and this tendency may remain even after the pandemic crash. For many companies that are satisfied with productive employees working at home it would be better to leave offices and accept this distant working as a standard. It means that the demand for office spaces will be lower and will resume only in some period of time.

 

What is the possible future of the real estate?

 

future real estate

 

 

If to remember many previous crises, they used to affect one side of the process more. But Covid-19 has influenced both buyers and sellers, so it can be challenging to predict the future.

However, real estate experts make forecasts that buyers will return to the market as soon as the number of new cases will decrease. At the same time, it would take much more time to attract sellers back to the market and it can be a great obstacle.

 

In any case, real estate professionals hope to see a ‘V’ or at least ‘U’ curve with a short-term silence period. It means that both buyers and sellers will return to the market and it will happen rather quickly. The reason for such hopes is the experience of China where people returned to a traditional way of life incredibly quickly. 

 

 

 

 

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