Real Estate

Impact of Covid-19 in the Real-Estate Industry

Impact on real estate

The outbreak of COVID-19 novel coronavirus has literally turned the world upside down. The Covid debacle is still a story on the news and it seems it’d take a while for this cloud to clear off. The impact of this pandemic on the global and national economy is far beyond description and it hasn’t spared the real estate industry either. However, the challenges are well-documented to discuss, analyze, and arrive at pragmatic solutions sooner or later. A direct impact on the real estate industry nearing to shut down has already taken place in early March 2021. However, the US equity Real Estate Investment Trust (REIT) share prices have declined by 24.20% since December 2019. This implies that the shares of the real estate companies have been put to toss and the investors are less hopeful about the current trend. In this article, we’ll discuss some of the impacts of this pandemic in the real-estate industry.

What do real estate experts say?

There is a significant decline in homebuyers amid the COVID -19 pandemic. But experts seem to be optimistic about this current situation. However, the new listing numbers have seen a sudden drop to 30% from last year. The downward spiral comes at the same time when the unemployment rates have surged in the economy. However, the impact of the coronavirus on the housing market is still under study and can’t be estimated accurately. However, the health and safety of the people are considered paramount at the moment.

Covid Vs Real Estate

Property values:

Real estate tends to have lower liquidity and less volatility than other equity investments. The stock market is the real-time representation of the market. The real estate value tends to move slowly due to the 10 plus year investment horizons, long term leases, higher cost and longer time duration required to sell the property. Hence the market value does not adjust quickly as the REIT prices are down to 60% from May 2019. This metric provides a perspective that cannot be ignored while considering the property level valuations.

New challenges for home buyers:

Buyers get mixed reviews. Interest rates are at a great historic low. Buyers who have lost their jobs or been furloughed in the pandemic have trouble securing a home loan. The real challenge is getting qualified for a home loan. It’s really harder to get approved if you are laid off. JP Morgan Chase, the largest bank in the country, has recently announced that borrows must have a higher credit score to make themselves qualify for a home loan.

Increase in the sales price:

The sale prices of the houses continue to increase. The average sales price has certainly increased this time. Sellers are getting more for their house this year than last year. Buyers are actively looking for the right price in the market, if they are priced right then the homes are selling really fast. As the home-buying season comes in full swing, the whole housing market tends to pivot in response to the COVID-19 pandemic.

Impact on sellers:

Is the decline in new listings good for sellers? Will the market remain strong for the sellers? Let’s see. Theoretically, it is good news for the sellers. But we are yet to see the impact on potential buyers. However, we could see the sales tail off owing to the current economic condition. The COVID-19 pandemic has rocked the financial markets and triggered massive layoffs across the country. These layoffs and unemployment rates would have a substantial impact on the Real estate Industry. The real question is how long that will last? For sellers, who list their homes will not have a lot of competition in the market as of now.

New home construction remains strong:

What about the new home construction? Does COVID-19 impact those sales too? The home builder’s association has said that even when the real estate industry was disrupted, it still remains strong. Given the stay-at-home orders, there is a reason where few people walk towards buying new homes. However, web traffic still indicates that there is a motivated pool of customers who are said to be active in the market. Two factors continue to fuel the new home construction. They are the low-interest rates coupled with the low inventory of homes for sale. These aspects contribute to the need for new buildings and would keep the industry in demand.

Optimistic predictions for the future:

The COVID-19 has rattled the housing market but the experts are optimistic about the recovery. It would become more balanced once the orders are lifted and the economy starts to rebound. More sellers come into the market once the pandemic is over. Buyers might also change their price points. Hence all this will bring back a balanced market.

These are just a few ways how the commercial real estate market and the whole builders in Chennai were impacted due to the pandemic. It is going to take some time for the industry to recover, the overall future of the real estate industry is bright. It would be interesting to see how the market rebounds once the vaccine is completely available. However, it is going to be the rate-limiting step as far as the recovery of this industry is concerned.

I am enthusiastic blogger & SEO expert. I am digitally savvy and love to learn new things about the world of digital technology. I loves challenges come in my way. I also prefer to share useful information such as SEO, Google Algorithm Update, SMM, PPC, WordPress, Web Hosting, Affiliate Marketing etc.

Leave a Reply

Your email address will not be published. Required fields are marked *