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Post-COVID-19 forecasts in the real estate sector

post COVID 19 forecasts - Post-COVID-19 forecasts in the real estate sector

The coronavirus crisis has affected all economic sectors and among them, of course, the real estate sector, which has only recently recovered from the deep crisis it suffered in 2008. During the first quarter of 2020, the Housing Prices Index in Spain rose 1.1%, according to the National Institute of Statistics (INE, for its initials in Spanish). But the lockdown marked a turning point and the post-COVID-19 forecasts are not very encouraging in the short-term, although the dip is small compared to the previous crisis.

Post-COVID-19 forecasts

Experts consider that the trend towards lower housing prices will accelerate in the second quarter of 2020 and that a recovery may not occur until 2024. The drop in sales, families’ financial situation, uncertainty, and financial hardships are making a readjustment of prices necessary.

An uneven readjustment

This adaptation of prices, however, will not be homogeneous. According to analysis by CaixaBank Researchthe largest drops will be in the existing home market, which has the highest number of transactions.

But sharp decreases are also foreseen in tourist areas and cities. In the first case, the reason is the reduction in mobility and international investment. In the second, changes in lifestyle come into play: lockdown and telework has led to demand moving to peripheral areas.

Differences with respect to the 2008 crisis

Despite all of this, experts ensure that this crisis has little do to with the previous one. The trigger isn’t the same and everything points to the response not being the same either. On the one hand, the origin of the crisis isn’t the real estate market. On the other hand, the economic scenario at the beginning of the pandemic was very different than in 2008: it was more solid and had greater financial solvency than in the previous crisis.

The root cause of the prior crisis was an imbalance in the sector, a mismatch between supply and demand, and oversized prices. On top of all of this, there was a credit crunch and a lack of flexibility in the real estate market. Indeed, the bursting of the ‘real estate bubble’ caused housing prices to fall up to 45% in five years.

The post-COVID-19 forecasts are very different. Experts, such as those at CaixaBank Research, predict a drop of up to 9% in housing prices through the end of 2021, but that it will not extend much further than that.

What the recovery will look like

The post-COVID-19 forecasts consider U-shaped, V-shaped, and W-shaped recovery scenarios, but it will depend on the capacity of the sector itself to adapt to new circumstances as well as other factors.

In any case, forecasts point to a real estate sector recovery in three or four years, with or without ups and downs.

In this scenario of price adjustments, investing in the real estate sector is an opportunity. Spainhousesoffers a wide range of properties to choose from.

Visit our website and don’t let this opportunity to make a great investment for the future pass you by.

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