Real Estate challenges in 2020 and the impact of Covid-19

It goes without saying that the Covid-19 pandemic has had an unprecedented impact on global markets, affecting practically every sector, not least of all real estate which already faced a number of challenges in 2019.

Social distancing measures, the shut-down of businesses worldwide and an unfavourable economic climate have hindered operations for most real estate businesses everywhere.

But, despite an obvious hit, how is the real estate market currently performing and what can we expect to see in the coming months?

Will markets start to recover?

According to a recent 2020 housing forecast by US based

    •® saw median home prices increase by 6.2% year over year on in the week ending June 27.
    • Homes are being purchased quicker than they did in 2019, before COVID-19 became the primary topic of discussion.
    • Bidding wars are back as first-time and trade-up buyers who have lost out on other homes slug it out.
    • A Fannie Mae housing survey of 1k participants reported that almost 2/3 of consumers, 61%, said it was a good time to buy a home in June (up by a 9 percentage point from May).
    • Roughly 41% of respondents said it was a good time to sell, also an increase of 9 percentage points from the previous month.

“The housing recovery has been nothing short of remarkable,” says Ali Wolf, chief economist of Meyers Research, a national real estate consultancy. “The expectation was that housing would be crushed. It was—for about two months—and then it came roaring back.”

Is inventory being impacted?

A July 10th market report by Zillow suggests that inventory will remain scarce and that the market has tilted in favour of sellers:

    • New for-sale listings dropped 1.5% from the previous week. They are now 7.9% below last month’s level, and down 27.2% from a year ago.
    • Total for-sale inventory is 22.4% lower than during the same week last year.

Mortgage rates at a record low but for how long? suggests that US mortgage rates have hit five new all-time lows in less than three months. And while August could hold new record-low mortgage rates, there are no guarantees this streak will continue, largely due to Covid-19 developments in the coming months with a second wave possible in many countries across the globe. And as The Mortgage Reports suggests, whilst mortgage rates could skyrocket back to 2018-2019 levels in mere days if a viable vaccine were announced, this appears a long way off still, though.

What type of Buyer and Seller behaviours are we seeing?

A recent 2020 Flash survey conducted by the National Association of Realtors in the US analysed the feedback of over 3000 members from the real estate sector.

In terms of Buyer behaviour:

    • 34% of members reported buyers are delaying their home purchase for a couple of months.
    • 19% stopped looking due to concern about losing their job.
    • 10% reported members are continuing the process, but only relying on virtual communication.
    • 6% reported clients are deciding not to buy or sell indefinitely.
    • 23% reported there is no change in client behaviour, and they continue to meet in person

As far as Sellers go, these were the survey results:

    • 38% of members reported sellers are delaying their home sale for a couple of months.
    • 13% reported members are continuing the process, but only relying on virtual communication.
    • 7% reported clients are deciding not to buy or sell indefinitely.
    • 20% reported there is no change in client behavior, and they continue to meet in person.

Finally, how will Europe fare?

This Savills’ article would suggest that whilst no European investment market will be immune to Covid-19, the extent at which they’ll be impacted and how quickly they’ll recover will differ across Europe’s cities. Based on Savills’ assessment of this impact, using factors such as the stringency of lockdown measures, economic dependence on tourism and retail sectors, GDP growth, market liquidity, investment characteristics and finally contingent upon the resilience to the past GFC, the results suggest that London, Paris, Berlin, Stockholm and Frankfurt should be more resilient. More on this here.

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