2020 was a black year for the global tourism industry. The impact of the coronavirus began to be felt at the beginning of the year, when tourists and investors from China disappeared from the international space. In March, the borders of most states started to get locked.
The lack of tourists was a heavy blow for countries whose economies are closely tied to the hospitality sector like Spain, Italy, Greece... Other states survived the isolation better than others, but in the real estate market, the effects soon became palpable.
Interest in tourist facilities predictably fell. This applies to apartments for short-term rent, and to hotels, apartments and other types of housing designed for vacationers. The number of transactions decreased, but this did not lead to a massive drop in prices. Hotels got hit the hardest. Some residential properties have switched to long-term rentals, while others are waiting.
Part of the lack of foreigners was covered by domestic travel, but the overall drop was still significant. Perhaps, if the vaccine is successful, international tourism will revive, but do not expect this until next spring.
Another notable change is that there is a sharp increase in interest in properties for a secluded holiday, whether it is a house, a villa or even an island. All depends on the size of a wallet.
Over the past decade, we have become accustomed to the fact that renting for a couple of weeks is as easy as writing an e-mail. Therefore, lots of people have invested their not very big money in "tourist" apartments. Many took out loans for these projects and paid for their obligations at the expense of stable incomes. But in 2020, the maintenance of such housing was often unprofitable.
For this reason, a significant part of the owners refused short-term rentals and tried to rent out housing for a long time. That is, the offer has grown. Meanwhile, demand has collapsed: tourists, students, and a number of employees left the market. Part of the population lost their income and stopped paying rent. This was especially acute in New York, where many people prefer rented housing. As a result, rates have decreased, and rental properties have become less attractive in the eyes of investors.
The good news is that the high-tech segment of remote transactions has flourished. Realtors have mastered 3D and video tours, notaries have dealt with electronic signatures and special software for certifying transactions.
The weak link is the buyer: they do not really want to buy a house without seeing or touching one. But those who dare are usually satisfied with the result.
And again, a year ago this would have been considered fantastic, but in 2020, citizens spent weeks or even months locked up in their homes. This led to a reassessment of values: small apartments, which were considered a good inexpensive option, especially for the young buyers, turned out to be a trap for residents of megacities.
One of the clear wishes of the inhabitants of Europe and America was to move to larger housing with open space or outside the city. Since a significant part of the knowledge workers moved to the remote, life in the metropolis has lost many of its attractive features.
People realized that you can work from any place with good Internet, and live better among the greenery in clean air. As a result, demand has increased prices for suburban real estate, people began to appreciate villas or single-family homes more.
In addition, there is a tendency to increase living space, in extreme cases – repairing it. The ability to allocate an office (or home office) in your home has become the main selection criteria. Small towns and picturesque suburbs are experiencing a renaissance: citizens, including people with big money, are rushing to them.
All last year futurologists have been thinking what offices would look like after the pandemic. They offered isolated desks behind partitions and safe routes from the entrance to the workplace. However, most likely, the business will follow a simpler path.
Many large companies have sent employees to the remote, but the future after the end of the pandemic they see differently. Someone intends to return 100% of people to their desks. Many talk about a hybrid format: two or three days in the office, the rest of the time at home. But almost certainly the option of remote work will be developed, which means that the need for office space will be reduced.
Coworking is another promising format of the past years that have faced a serious crisis. The amount of those who wanted to once again take a ride in transport and open their laptop in an open space next to a neighbor for the sake of "conversations at the coffee machine" last year became significantly less.
Another "word of the year". The desire of people to reduce contacts hurt the entire social sphere, and some segments, which were already approaching the crisis, were in a difficult situation.
Among the most affected industries are retail and catering. In these areas in 2020, significantly more companies closed than opened. The number of vacant spaces also grew.
However, the future of shopping centers was already in question a year ago. People began to switch to online shopping, and shopping as entertainment began to lose its position. Therefore, if you can count on a "rebound" in demand for catering after the lifting of restrictions, it is less certain with large stores. This format is likely to change, the focus shifts to utility rooms and warehouses.
Investment in student housing was considered a fast-growing and unambiguously promising segment, and it confused all the cards for 2020. Universities switched to distance learning, and most students chose to stay at home. And foreigners were not released from abroad at all or their residence permit was not extended. As a result, specialized housing is empty, and the segment of rental apartments in university cities has been replenished with unclaimed units. The result is the reduction in rates.
The unprecedented crisis has prompted appropriate support measures. The situation this year is already compared to the Second World War or the Great Depression, but most of the "rich" states have tried to protect citizens from falling into mass poverty.
Many countries have resorted to the simplest measure – the distribution of cash or superlative loans. The result of people having extra money was an increase in prices and the expectation of further inflation. This, in turn, provoked an increase in demand for real estate.
In particular, the administration of the outgoing President Trump made record payments to the population. Next year, real estate prices in the United States are expected to grow by 6%.
Another popular measure is lowering mortgage rates. Its task is not only to give citizens the opportunity to improve housing conditions, but also to help the real estate and construction markets, which are also among the affected industries. As a result, some citizens who were sad in cramped apartments were able to move to larger housing or even to their own house, banks went crazy for several months from the number of applications, and prices inevitably increased.
Another measure to encourage transactions is freezing, reducing or eliminating taxes.
It should be noted that the opposite trend also developed in parallel: states raised taxes, including on real estate, in an attempt to replenish the empty treasury. So, in Canada, they want to introduce a tax on the purchase of housing by foreigners. In Paris, they want to increase three types of taxes at once. South Korea is also thinking about introducing an additional tax for foreign buyers.
The sphere of investment immigration was in a dual position. On the one hand, because of Covid-19, the movement of most people was limited, and the potential participants themselves did not want to risk their health. On the other hand, the value of a second passport or residence permit increased, because during the quarantine, they made it possible to cross the borders closed to all others. But not all of this year's industry news was related to the pandemic.
The Cyprus Citizenship by Investment Program has been under fire for several years. The accusations intensified at the end of the last year, when it was revealed that dozens of foreigners with dubious backgrounds had obtained Cypriot passports, and after an investigation by Al-Jazeera, the program had to be shut down.
As a result, Cyprus has lost a tangible source of income and an incentive for housing construction. The republic has already felt the consequences: sales have sunk; construction sites have become much smaller. At the same time, in the middle of the year, investors were trying to catch the "last train", so there was a rush in this area.
Malta's "golden passport" program has also been repeatedly criticized. In 2020, its conditions changed, and not in the most favorable way for investors. Now you will have to spend at least a calendar year on the island to obtain citizenship, so it is no longer like just buying a passport. The new rules came into force towards the end of the year, so their impact on the real estate market has yet to be assessed.
The past year was clearly a good one for the Caribbean states that are developing their investment citizenship programs. To obtain a passport in previous years, as a rule, you did not need to visit your new homeland, but now the process has been further simplified and transferred to online. As one of the options for obtaining citizenship, the purchase of real estate is often offered.
The real estate market of the Emirates has been on the decline for several years. It was planned that the Expo 2020 would give it a new impetus, but it was canceled for obvious reasons. In these circumstances, the Emirati authorities did not sit idly by and launched almost a dozen initiatives to attract tourists and investors, from visas for pensioners to the easing of traditional restrictions for tourists and the regulation of timeshare, which should reduce the share of empty housing.
Formally, the UK left the European Community on January 31, 2020. However, until the end of the year, the country was negotiating with the EU on what principles the economic and political relations will continue. The main issue is the principles of trade. It was assumed that from January 1, the EU and Britain will switch to trading with taxes and quotas under the terms of the WTO. However, at the end of the year, the parties were still able to agree on the preservation of duty-free space. A "soft Brexit" is another growth stimulus for the UK property market.
Domestically, prices continued to rise, with London's luxury properties breaking record after record. The postponement of stamp duty payments also helped. Wealthy foreigners rushed to buy housing in the country as an additional argument for entry. So, according to Astons estimates, from the beginning of 2020 to November, foreigners purchased 6,438 houses and apartments in London for a total of $4.4 billion.
The British are traditionally seen as one of the drivers of the European tourism and investment market. In 2020, the activity of British investors has increased significantly. The opportunity to get a residence permit for investment attracted many residents of the Foggy Albion, and in the prospects of new quarantines, many wealthy Britons wanted to have a second home somewhere in Italy or Spain.
Sharp changes in exchange rates encourage people to invest in something reliable. Most often, this role is played by real estate. Thus, the instability of the Turkish lira has become one of the reasons for the mortgage boom in the country. At the same time, in nominal terms, prices rose so that Turkey was the world leader in this indicator. At the same time, if you adjust the values adjusted for inflation, it turns out that prices have practically not increased.
Another country where the exchange rate has jumped was Russia. The decline in business activity around the world has led to a drop in oil revenues. In these conditions, wealthy citizens urgently needed to make reliable investments, and many chose real estate, including foreign ones. This was most noticeable in Turkey. And in Bulgaria, on the contrary, there is a tendency to sell housing owned by Russians.
In the past year, political turmoil has also affected countries that we used to consider a bulwark of stability. First of all, we are talking about Belarus. There was unrest in Armenia and Azerbaijan. Some states have tried to capitalize on the situation by offering preferential terms to those fleeing political persecution and military conflicts.
For example, Poland launched a special program for IT specialists from Belarus, and in less than two months, ten thousand Belarusians moved to the country. A separate program for students from Belarus was opened by the Czech Republic. At the same time, Belarusians themselves dreamed of moving to Lithuania. Moving people should increase pressure on the housing market and lead to higher prices in these places.