By Stefano Sciandra
Your commercial awareness dose
The COVID-19 crisis has disrupted financial markets and economies worldwide and the
consequent GDP’s sharp decline in 2020, has harmed property markets, forcing
both owners and tenants to find solutions to adapt to the change. Across British cities, demand for rental properties is down 23%. As per Rightmove ( a UK-based property company), monthly rents for newly let rental units are down 4% on average in London and are sliding in other cities as well. This is also happening in non-prime locations: Tooting Bec, located in South London, has seen its monthly rents dropping by 11,5%, from £1,450 in late July to £1,285 this autumn.
Due to the ‘work from home’ phenomenon, British citizens are leaving major
cities and relocating in suburban areas or moving back in with their parents. Homeowners have joined tenants in this race to suburbia, since cities are not appealing anymore, due to corporate relocations and the sharp decline of overseas students, expected to drop by 50-75% this autumn. The UK’s capital is however expected to bounce back soon and it is already experiencing an increase of transactions from overseas buyers.
With offices expected to become fully operational soon, areas near business districts are
experiencing a mild bounce back, since people are expected to keep on avoiding public transport and instead, prefer to walk or to cycle to reach their destinations. The European property market has seen housing prices to fall by 5%, due to a lack of confidence in the market and the halt of house viewings, because of the implementation of social distancing measures. Since the effects of the COVID-19 crisis on the economy will keep on impacting European markets, housing prices are expected to fall further throughout 202.
Germany and France have suspended evictions, whilst Italy is offering mortgage reliefs to its citizens. France and Italy have also halted constructions during this period. Due to different economies and responses to the crisis, European property markets differ from
country to country. The Spanish market, for instance, before COVID-19, was still recovering from the financial crisis and buyers and sellers are waiting to act, since its tight mortgage-lending rules are not favourable for buying and selling, especially now. On the contrary, the German market has proved to be quite stable and so has Lisbon, who will expect a demand boost in property buying due to its expanded visa scheme.
All of the above is also true for Global property markets, impacted by wage cuts, rise in
unemployment, corporate relocation, and drop of international tourists, expected to be at around 58-78%, according to the World Tourism Organization. The hardest-hit cities are either located in emerging markets or were already experiencing a weak price growth pre-pandemics.
Asian cities, such as Hong Kong and Singapore have seen a 5% drop in housing prices, but are expected to bounce back once the travel and social distancing rules are relaxed.
Travel and local restrictions are expected to be fully lifted only by the end of 2021 or sometime in 2022, so some of the strategies that governments can introduce to protect the Real Estate sector could be tax breaks and loan reliefs, as proved by Miami, whose market, helped by the SALT (state and local tax) the deduction performed better than other US markets.
Since most Real Estate agencies are now closed, worldwide homeowners and tenants/buyers have massively started using online property websites, which now offer enhanced 3D tours and drone videos. This way, all the parties involved in the property market operations, can save time and money, and enact social distancing measures.
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