Growing Price and No Discounts. Unexpected Consequences

The impending inevitable fall in housing prices was discussed in the spring of 2020, when it became clear that the coronavirus is going to stay for a while. In the Internet there is a whole cast of hunters for the discounts. Realtors from different countries told (more often complain) about purchase requests with the expectation of a discount of 20, 30, or even 50% of the market price.

The agents and developers themselves allowed a slight drawdown, but no one predicted a collapse in prices.

The year ends. The first results are already known. The reaction of the markets to the pandemic was paradoxical. Prices ... are rising, and somewhere even faster than before. What’s going on?

Record Growth in Housing Prices in the EU

The Eurostat has reported for the first half of the year. In 27 countries, the annual house price growth of 5.6% and 5.2% in the first and second quarters, respectively. Such indicators have not been seen in the EU since 2007.

Some countries have distinguished themselves particularly. In Luxembourg, square meters rose by 13.3%, in Poland - by 10.9%, in Slovakia - by 9.7% durind the year. Almost no one went into the opposite direction.

But maybe the statistics for the first half of the year are not indicative? After all, the real estate market is inert, and it has not yet had time to respond to the consequences of the pandemic. However, recent news from different countries confirm the upward trend.

Prian has identified five reasons for a further increase in housing prices. Use this checklist to analyze the situation in the region that you are interested in.

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Villa in Antalya, Turkey

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Apartment in Antalya, Turkey

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45 sq.m 2 1

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Secondary real estate. It is located on the ground floor. One bedroom, kitchen- living room. Garage. Excellent investment, affordable price.

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The Power of Economy

Coronaries has been dubbed the strongest shock to the global economy since the Second world war. But, first, different countries have met this kind of stress with different initial data. And secondly, the support was also unprecedented: according to the latest IMF estimates, since the beginning of the pandemic, $12 trillion has been poured into the world economy in the form of fiscal support alone. It is about three of the annual budget of the United States.

The value of real estate as an asset always depends on the situation in the region where the object is located. The decline in GDP and business activity, falling wages, and rising unemployment naturally lead to a sagging of housing prices. Another stress factor in 2020 is the strong dependence of the economy on tourism, which for obvious reasons will not bring much money to the treasury.

Statistics show that housing prices continue to grow steadily in those countries that have withstood the first blow of the coronavirus with dignity.

Chronic Shortage

The coronavirus could not change the main law of the formation of any price: if a certain product is needed by everyone, but there is lack of it, the cost increases. The housing shortage in the megacities of developed countries has been forming for decades. People go where a good job is. Developers do not keep up with this flow.

In some places, even legislators do not have time. In the Czech Republic, for example, due to the difficulty of obtaining construction permits, the launch of new buildings is delayed for five or even ten years. The new construction law cannot be adopted in any way.

Leverage

In 2020, even without anti-crisis measures, rates were much lower, and the share of mortgage transactions was higher. But if last year many countries tried to tighten the screws (increased the first installment and interest on the loan, tightened the requirements for the borrower and collateral), then in order to overcome the consequences of the pandemic, these measures were abandoned.

Developers barely keep up with demand in Europe. For instance, in Czechia the launches of new projects can be delayed for up to 10 years.

Inflation Expectations

In any incomprehensible situation, the demand for reliable tools with which real estate is traditionally associated with increases. Deposits in Europe do not bring any profit at all: rates are just above zero (or even negative), and the stock market is too unpredictable.

In addition, there are fears that the very trillions of dollars poured into the economy will lead to excessive inflation in the future. As a result, not only professional investors, but literally everyone who has savings, are starting to look towards the housing market as the easiest and most understandable way to save money.

The Structure of Demand

At the beginning of the pandemic, it seemed that ruralization was about to begin, the outflow of residents from densely populated epidemiologically disadvantaged cities to quiet suburbs increased. The mass transition to remote mode seems to have contributed. But this process is long and non-linear.

The first thing that realtors of many European countries noted was the change in the structure of demand. In 2020, buyers became more interested in spacious apartments with terraces, townhouses with plots, houses in the nearest suburbs. In short, more comfortable for self-isolation housing. This, by the way, is one of the reasons for the technical increase in prices: the average receipt for the purchase of such properties is higher, which is reflected in the statistics.

The markets of suburban and rural real estate in European countries also received an additional boost in demand, but there is no talk of mass migration of the population to the countryside. But many owners of villas and apartments by the sea preferred to quarantine in resorts, for some the pandemic became an incentive to buy.

"So, there will be no discounts at all?"

There will be no mass total sale of real estate. At least in the prosperous state of Europe in the foreseeable future. But any statistics "on average for the country" take into account only the general price trend. There have always been owners who need to sell "yesterday". There have always been developers who have "burning plans". And in 2021, the world is experiencing the strongest economic shock since the World War II.

You can look for luck, which is what many realtors do for their clients. Another thing is that it is more difficult for foreigners to react quickly in conditions of closed borders. Infrastructure for remote sales is almost everywhere created. But not everyone is ready to buy real estate online.

Photos: pixabay.com

Quoting conditions of Prian.info materials