The coronavirus has pushed real estate to reinvent some of its business
The coronavirus has pushed real estate developers to reinvent some of their business, but in some cases, the business was already ahead of them. At this time when the coronavirus has wiped out any expected economic forecast, selling a home has become impossible unless the digital presence of the home is such an attractive attraction that a physical visit is incidental. So much so that almost 14% of luxury home buyers buy assets without visiting them.
There are two decisive factors in carrying out this type of transaction: the transparency of the information offered and the ease with which, with the use of technology, virtual visits can be made to the property. However, “it is always necessary to feel a special feeling to take the next step. That is where the local contact is decisive in making the final decision
Before COVID-19, the reason for this remote sale was because the buyer lived abroad and although they did not have time to see an interesting property recently put on the market they did have a person of total confidence on-site to give the go-ahead to the property.
The luxury real estate sector in times of coronavirus
Week by week the economic forecasts are changing as we are facing a new type of recession, where a 10% fall in GDP is predicted for 2020, according to Goldman Sachs in its last report, and a partial or almost total recovery of what was lost during 2021.
We are facing a global crisis in which we all start from similar conditions once the pandemic is under control. A window of opportunity is opening in several markets, including real estate, to buy at discounts of between 10-20%. Given the period that we are going to start with a decrease in the number of operations, those who have the need to liquidate their properties are going to assume these discounts to achieve it.
Real estate is a sector with a lower speed compared to others so it is likely to take longer to recover the same figures of business volume, real estate is a refuge for most savers and in prime locations prices will not be affected as surely occur in more humble locations.
Trends for 2021 in the luxury real estate market
The high-end residential market (between 6,000 and 9,000 euros per square meter) is also suffering the consequences of the health and economic crisis of the coronavirus. Before the arrival of the COVID-19, price increases were expected throughout 20 large cities around the world with weight in the sector. Now, according to some forecasts, only four of those twenty cities – Lisbon, Monaco, Shanghai and Vienna – will see moderate growth (between 0.1% and 5%) throughout 2020. Other major cities such as Berlin, Paris, London and New York will see a stabilization or moderate decrease in prices, which will be between 0% and -5%.
At the beginning of 2020, Paris (with a 7% increase), Miami and Berlin (5%), and Geneva and Sydney (4%) were the cities with the greatest prospects for improvement. Now, in the post-Coronavirus scenario, all these cities will see their rates stabilized or in free fall.
With regard to the prices of high-income housing, some real estate consultants point to an average decrease of 2.5% in the year-on-year change during 2020, to then see a rise of 1.1% in 2021 (similar to the 1.2% reached in 2019). However, for the recovery of the prime market, it will be essential to relax travel restrictions and return to normal for airlines.
However, it will take more than a year for the volume of prime sales to recover to previous levels. In Europe, initially, local buyers will lead these transactions, while the international investor will take an average of three to six months more to sign acquisitions.