The property market has performed well in the past economic shake-ups, but the current coronavirus pandemic brought drastic changes to the industry. It is evident that the acquisition of properties has decreased, although experts say that this is just a short-term impact. They claim that if the prices of houses fall, the industry can still bounce back.
At the moment, many high-end luxury properties are being priced at a lower rate, which is likely due to the fall in the market share. A lot of people are losing money or making less income, and businesses are either temporarily or permanently closing. In situations like this, higher-priced properties are more affected than lower-priced ones.
Total Property Sales are Dropping
According to the National Association of Realtors, total sales dropped at a 17.2% rate year-over-year (4.33 million units in April 2020) from the same time last year (5.23 million in April 2019). The national median existing single-family home rate in the first quarter of 2020 was $274,600, up 7.7% from the first quarter of 2019. In response, it is highly likely that the prices of houses will take a downturn due to the coronavirus.
It should be noted that the property industry was gradually obtaining momentum but the present global health emergency is changing the chain of events. The general degree of optimism the consumers feel, as well as job security, are among the top factors affecting home purchasing decisions. Buyers are putting off buying properties due to financial challenges during the pandemic. The reduced working hours, lack of bonuses, and the chance of losing a job can affect a potential buyer’s payment capabilities.
People’s jobs and income are in jeopardy, making them less confident in making repayments despite many companies offering the ideal mortgage rates. Additionally, strict lockdown and social distancing rules are imposed, banning personal inspections and auctions that also impact property selling. While some prospective buyers and sellers are shifting to the online platform’s utilization, the number of people viewing properties has significantly lessened.
As noted by industry specialists, the drop in property prices is also influenced by the recession, which is a considerable threat since it can mean more negative quarters of GDP growth and a rise in unemployment. The housing market fared relatively well against economic challenges in the past, but the slowdown in the global economy due to the coronavirus is evident.
How This Affects Financial Decisions
The shift in consumer demands has led brokers and lenders to crunch numbers and provide their customer’s best interest in making sure that acquiring a home loan in this time and age will not put a financial toll on them. Pre-approved prices for buyers who are undergoing financial hardships are now thoroughly reviewed by brokers and lenders. Many lenders are asking for recent payslips or other kinds of background verification before they advance the loan.
Consumer attitude and needs are also ever-changing; thus, a complete re-evaluation in the residential estate is ongoing. Due to the financial challenges, buyers are now a lot more thoughtful when purchasing homes and spaces, which makes more sense because of current situations. With the growing number of people working remotely, buyers are now looking for houses with separate living and working spaces.
Sellers have been marketing “bonus rooms” before, and these spaces can now be considered offices or study rooms. People also want somewhere else to go without having to leave their homes. In general, spaces are becoming essential; pools, game rooms, libraries, even the backyard are all being taken into consideration when buying a property nowadays.
A Final Word on Buying Properties
The industry is struggling, but it is also attempting to do its best. Price is always a significant factor, but the economic uncertainty brought by the current outbreak has become a real game-changer. On the other hand, rental demand is also predicted to increase in the coming years, with rental fees rising as well, especially in major urban regions. As such, some investors believe that investing in rental property is a smart business choice, even in these trying times.
There are a lot of unknowns in the equation, but some facts remain clear. First, the property will always be a reliable asset to have, as its value rarely depreciates and can even double up given proper care and maintenance. Next, a shelter will always be a necessity for human life, and owning a house is an excellent way to improve the quality of life.
Finally, it’s fair to assume that the pandemic will not last forever, and at some point, the real estate industry will normalize its operations. When that happens, the people who took risks and bought low will be the biggest winners.