«Thus far, the prices are not been reduced, but people opt out of buying». How European real estate markets are experiencing a pandemic
Investors, including Belarus, have always regarded European real estate markets as generating good income. But coronavirus ruined the whole picture. Today, international real estate agencies have migrated to remote operation and start working for the future. We talked with some of them.
Alesiya Bigoun, Director of the Prague real estate agency «Admireal s.r.o.»
— It is too early to talk about trends as yet; the state of emergency, and then general quarantine, which has many exceptions, was announced not long ago. You may go to work, to Institutions, to relatives, to walk in nature...Many open house visits have been postponed.
Local buyers, of course, grow wary and those who can wait — are waiting. That means, people whose work was closely related to the industries directly affected by quarantine, changed their minds about buying. Such as, of course, tourism and entertainment industry. However, buyers from other industries haven’t postponed the purchase; we have already signed reservation contracts for the purchase of apartments, right after the emergency rule declaration.
In the rental market, we already see emerging panicky trend of transferring Airbnb and Booking apartments to long lease. Now it is a perfect time to rent a nice apartment in the center, with a beautiful furnishings and inexpensive.
The problem is that almost no one comes to the country and moves inside due to quarantine, so the demand in the long-term rental market is temporarily low as well.
However, sellers are in no hurry to reduce prices. Everyone hopes that the measures taken by the government will take effect, and within 4, maximum 6 months they will be able to return to normal life, and then to count on a deferred demand. Therefore, the sellers who do not need to rush with money do not lower prices so far.
Though, now is a high time to «catch» options from desperate sellers, who urgently need money, they will have to drop prices.
Demand from foreign buyers has revived because many people, in the light of recent events, are again thinking about withdrawing their savings to safe and stable countries. Of course, right now there are no such countries in the world at all, markets are in a fever around the globe, however, the coherence of the European governments actions and discipline of residents who observe quarantine and use personal safety apparel in the street will certainly have an effect, and the epidemic will be able to quickly defeat. Time will show.
As I said, at this time we start receiving requests from customers hoping to secure their savings. In addition, there are great chances to find good options with discounts. It is too early to judge, which is greater: the outflow of customers due to instability and starting crisis, or the inflow of investors in connection with the same things. In any case, both the entire Czech real estate market and our agency are not so dependent on demand from foreign buyers to be seriously affected due to their outflow.
I think it will be hard, but people will adapt. In the Czech Republic, the government has already taken a number of measures for the economic support of small businesses, including interest-free loans, deferred rental and loan payments. Those companies, which are now in a favorable position, offer assistance to the state and the population. For example, large online supermarkets bring food to older people with free and noncontact delivery. Electric bike rental offered every resident free minutes to reduce the load on public transport. An advertising textile factory sews masks without profit. There are other examples of mutual support and care that will help overcome the crisis as soon as possible and with the minimum losses.
Ilona Csick, Franchise Partner of Duna House franchise company:
— The situation with the epidemic, of course, affected the real estate market. Practically, we see no tourists, investors, or even students after the borders closure, which entailed the almost lack of sales in rental and investment real estate market. Likewise, income from the investment property decreased due to a sharp decrease in the tourist flow.
Tourists send booking cancellations made at the beginning of the year or at the end of the past year. According to experts, the tourism business market, that is, the investment market will reach the level of 2019 by the spring of next year.
However, interest in investment real estate continues, customers make requests only, of course, I cannot predict when they will come to viewings. Everyone who was going to come having already decided on the purchase, also postponed their trips.
The market is functioning thanks to purchases by the local population, which have also sharply declined because schools, universities and employees of many Institutions were transferred to remote learning and work.
Places of entertainment, salons, famous pools and baths with therapeutic springs are closed. The population is urged not to go outside unnecessarily. In this emergency situation, real estate prices did not go down, as long as they remained at the same level, the market is waiting. Selection increased due to decrease in demand, but there is no need to talk about falling prices and collapse, the market has taken so-called a wait and see approach.
We also work from home now. If quarantine drags on, there will be very few transactions in the real estate market. However, the drop in prices, I think, if happens, will be minimal, since the cost of housing in the market for new buildings is calculated on the basis of the cost of construction, and the new housing prices affect the secondary market.
Dariya Borzova, Managing Director of real estate agency «Oazis Invest Group»:
— In Bulgaria, serious measures are being introduced to combat coronavirus. This includes quarantine, and the cities closure (now it is a ski resort in Bansko), and travel restrictions, and recommendations to stay at home. The number of actual meetings with clients is reduced, our office is working remotely. But we run video tours of properties and online consultations.
We were able to promptly cross over and transfer all transactions to remote mode. First of all, the transactions, which have already been planned by notaries. Our agency is dealing with sale and purchase of real estate only. As for the seasonal rent, it is frozen, although hoteliers have already started preparing for the summer season.
The number of calls to our agency compared to the previous week decreased by 20%. We completely redirected to remote work, including the purchase process. Our brokers conduct inspections via video, remotely sign contracts, and clients remotely send their deposits. Notaries work within limited office hours.
Now clients are diverting their savings from bank accounts to real estate. Transactions are in progress. But renting is in a big question. Unfortunately, it is not possible to give any forecasts regarding the market condition in a few months. We hope for the best, do not give up!
Irina Kordyukova, Director of real estate agency «SolanaSpain»:
— Let me remind you that 2019 in the Spanish real estate sector ended with positive indicators. The market was stable. At the beginning of 2020, there were all prerequisites to assume that this year will repeat the trends of the previous one and January confirmed these expectations. The first month of the year in terms of sales was absolute success. According to the Spanish Institute of Statistics, in January 2020, 47.927 sales transactions were completed in Spain. This is a great indicator.
No one could have imagined that coronavirus would blow up the global economy. Back in early March, everyone was convinced that coronavirus was only a problem in China, and would bypass us. No one expected a global pandemic, not to mention the fact that not only Spain, but also the population of almost the whole world will be forced to stay at home, and the borders will be closed.
In this regard, I think that the real estate sector expects a sharp drop in the number of sale transactions in the first half of this year. However, already in the second half year (at least, I really hope so) everything will return to the previous level.
Please note, that Spain is a tourist country. Tourism is one of the main sectors of the economy. This primarily applies to coastal regions. And some cities, such as, for example, our Alicante, and all the cities of the Costa Blanca, practically live off tourism only.
In this regard, the Spanish government is considering a package of economic measures that are aimed at ensuring that the harm from COVID- 19 is minimal and that the country’s economy suffers as minimal as possible. A range of measures will be specifically aimed at supporting the tourism sector.
As for our real estate agency, from the second half of February, our customers start slowly abandoning their already planned trips to Spain. At best, they shifted to the summer, at worst — for an indefinite period. Despite this, we are actively working with all our customers, though online. Taking advantage of the fact that now almost everyone is sitting at home, on the Internet, there is an opportunity for closer communication, study and discussion of the matters that previously we had no time. In other words, today we are working for the future.
We have a standard working day, with the usual schedule, but everything is remote. All our colleagues, partners and construction companies, with whom we are in very close contact, work in the same mode. Only due to complete absence of visits, I can say that something has changed in the work.
Demand for real estate is kept, interest is high. Customers say that their plans remain valid, but, alas, there is no way to deal with this matter now. We have received letters from all developers we work with without exception, explaining how and through which communication channels the work will be conducted during the quarantine period. Not a single construction company has closed, not a single construction has stopped yet.
Some developers of the Costa Blanca can do and offer to fully ensure the sale of real estate remotely. Indeed, today a virtual 360º real estate tour is not news, and buying by phone, including property, will not surprise anyone.
In addition to the video tour, the buyer receives complete information about the property, its exact location with a description of the area and infrastructure, technical data, including layouts, specifics of quality, technical description, photos and videos. The property you like shall be reserved remotely. At that, the reservation contract is signed directly with the construction company and the reservation fee is paid. In Spain, the amount of the reservation fee varies depending on the developer and the property value on average in the amount of 6.000 euros. In the event that, after open house visit, the buyer will personally be disappointed in his choice, then the paid reservation fee will be returned to him in full.
Our agency works only in the international market, all of our clients are foreigners. We continue to receive requests for real estate, but our customers are just as interested as we are now interested in properties for the future.
The most exciting question is: when will real estate prices fall and by how much. It’s hard to answer today. It is unlikely that someone will give an answer now. After all, society is facing something new and unknown. Market behavior is completely unpredictable. And the exact scale of the crisis is also unclear.
But at the moment, no one developer has reduced housing prices. The same situations in the secondary market, prices are also frozen.
If the crisis will be deep and protracted, we can expect a fall in prices. If in a couple of months we begin to return to normal, then the prices will remain the same.