Yes, the coronavirus pandemic took the world by surprise – and what a surprise.
And, of course, it has become a common topic in conversations and news. But is there anything different about this virus? It affected people’s health and generated a kind of “community transmission” of damage to the global economy. And the real estate market is already feeling the effects of this impact.
This article will provide an overview of the impact of the coronavirus on the real estate sector. We will also talk about possible opportunities and ways to minimize the “blows” of this crisis.
Coronavirus & Real Estate Market
It is incredible to see that all business sectors are experiencing significant declines in profitability. Many compare the current phase with the terrible global financial crisis of 2008 – something that everyone wanted to forget. Several segments have already “tightened their belts” in the hope of surviving the turbulence caused by the coronavirus.
However, what about the real estate market? Well, the buyers and sellers are not in a much better position. According to the news network’s information, 80% of buyers interviewed said they postponed buying or lease a property.
Among industry professionals, 54% noticed an increase in sales cancellations since the beginning of the quarantine. The current phase is a severe blow to the real estate sector, which was in full recovery after five years of recession. In short, we are in the middle of a “hurricane.” But, the good news is that no storm lasts forever.
COVID-19 did not cause these changes, but they intensified with the pandemic, further enhancing the sector’s challenges. Many difficulties came to establish contact with end customers, present products, and close contracts to purchase and sell or rent real estate.
Is it possible to see opportunities?
Given the harsh reality, property managers must understand business opportunities and work on them. For some customers, the current crisis favors the purchase of a property. Something that can help in this objective is to talk to investing clients.
Because of this profile, many of them have investments in the stock market or are interested in knowing acceptable assets to inject capital at present. Because of the drastic fall of stock exchanges globally, it is easier to argue that allocating capital in real estate generates greater security.
After all, the real estate sector’s tendency to recover after the crisis tends to offset this type of investment. Another positive point of buying real estate today is the drop in interest rates. Thus, financing the purchase of property became more attractive.
However, here is advice for real estate managers: reducing the quality does not open the way for all investing clients. It is a good time for those who have an excellent financial reserve.
So, is the market going down?
Some people have saved capital that allows the purchase of a property in cash. Therefore, this group can take advantage of this phase to enter into financing and use part of the capital to diversify investment forms.
The tendency is to remain stable due to the increase in the volume of purchases over the internet. It is worth remembering that virtual companies use these buildings to concentrate and dispatch inventories.
In this way, it may be that the income from the real estate fund contributes to the settlement of the financing installments, leaving the capital in reserve intact.
However, that same group of customers can take advantage of another opportunity: cash purchase. This decision must take into account some factors. Before choosing this path, the buyer needs to understand if he has a useful asset in front of him.
If the property has an excellent location, quality, liquidity, and potential for appreciation but is momentarily depreciated, the chances of obtaining a good return on an investment after the crisis are great.
Ideally, the real estate agent should be very sincere with potential buyers and never opportunistic. In this way, it will gain customers’ trust and increase credibility in the market in which it operates.
In practice, what has changed?
Even with the coronavirus pandemic creating uncertainties in the economy, real estate companies and realtors continue to receive the same number of clients, perhaps even more in some locations, but now virtually.
When the current crisis started, many customers were already under contract at many real estate agencies and real estate agents. So it was necessary to find ways to finalize these contracts safely and maintain isolation between the parties. And it was then that everything started to get foggy for the CRE market in the pandemic.
Real Estate, Contractual Relations, and Coronavirus
Unlike other economic activity sectors, the issue of layoffs did not aggravate the real estate market in the pandemic, knowing that a large part of the professionals who work in this market is real estate agents. They receive their payment through commissions for business deals, without having an employment relationship. The sales force is still active.
The main problem faced now is the decrease in customers willing to know products physically. Real estate agents who had clients ready to sign a contract will now have to wait a little longer for this to happen.
COVID-19 brought fear and insecurity to people. It brought fear to those who sell because it will receive strangers to visit your property if you are busy. It brought fear to those who buy because of the substantial economic downturn and payment power. Historically, the property rental market has always been heated.
What do the numbers say about the CRE market?
Suffering impacts from people’s relationship with spaces, the housing market in the pandemic are undergoing changes and adaptations. Before the coronavirus pandemic, CRE sellers had heat in the market. All the equations made were directed towards growth, and it was a good sign. There are efforts by builders, real estate companies, and realtors in digital media to continue to spin the wheel of the real estate market, but this effort seems to be little to achieve good results.
In a survey carried out with 3,500 people, 86% of respondents said they postponed buying or lease due to the many uncertainties that the real estate market is experiencing in 2020.
Time to Maintain the Relationship
When identifying the first behavioral changes between sellers and buyers, many tools were hired to improve communication and management in companies, besides incorporating many new skills were in sales professionals. These are significant losses, both personal and commercial.
The economy and the real estate market will not magically return to where they were at accelerating levels, as were the months of November and December 2019. The second quarter of this year, 2020, suffered a dramatic contraction.
However, to understand what will happen to property prices in the coming months, it will be necessary to analyze each property down to the level of detail of its characteristics. Each property will be unique, the sampling pattern will no longer affect, and Big Data will be the primary real estate analysis tool from then on.
COVID-19 will undoubtedly be responsible for part of these pricing analyzes. Unlike natural causes that affect a property or for reasons of market fluctuation, the COVID-19 indexes affect people and how contamination spreads through cities and states. Properties can have their valuations up or down.