2020 has proven to be a tough year for the economy so far in all aspects. Every business, regardless of the size, has felt the pinch of this COVID-19 pandemic. In fact, in some parts of the world, you'd be lucky to cash in a few dollars in a day.
Everyone is asking questions, but no one is sure about the answers at the moment. How long will the pandemic last? Will the scientists succeed in finding the cure? All we can do now is speculate and hope for the best.
With most of the agencies falling short of clients, the real estate business has not been spared either. The impact is already there for everyone to see. There’s no denying the challenges involved when buying a house under normal financial conditions. Coronavirus has, however, made it nearly impossible, especially for self-financed buyers.
Here are some of the impacts felt by the real estate industry due to the current pandemic:
A Drop In Mortgage Rates
Due to the rising financial uncertainty, there’s really no way to tell what the future holds. As such, to make housing affordable during and after the pandemic, several governments have reduced interest rates.
The objective is to offset the negative impacts of the pandemic to financial markets. For instance, there are cases where mortgage rates have dropped by more than 20%.
Demand For Luxury Homes Could Reduce Due To Financial Market Volatility
Coronavirus will surely leave a massive scar in any industry. The real estate business is already nursing wounds, but with that comes an opportunity for some individual buyers. There has been a reduction in the demand for luxurious homes, which was expected from the start.
Perhaps the leading cause for this is the depreciating household wealth. With fewer buyers available, this could force real estate agencies to sell houses at discounted prices. If you were planning to buy a house, this could be your chance; keeping in mind the low mortgage rates, too.
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The Rate of Constructing New Homes Could Reduce Further
One of the main problems faced by various businesses since the start of the COVID-19 pandemic is the movement of goods. Transport, as we all know, is the pillar of any industry. The real estate sector is being impacted due to the slow movement of construction materials.
China, for instance, is the world's primary producer of some of the main construction materials. However, it’s now difficult to ship these goods without being delayed by the new directives put in place to curb the spread of Coronavirus.
In return, real estate businesses fail to meet client demands in time, affecting sales. Although the number of buyers has reduced, the supply of new houses has always been tight. As such, the slow construction of new buildings could exacerbate the situation. Remember, buyers are also monitoring the dropping mortgage rates, and could soon enter the market in full swing.
New Policies Have Been Implemented In The Real Estate Sector
As expected, governments have reacted to the economic effect of the pandemic by giving directives. In the U.S. and some European countries, for instance, evictions due to delayed rent payments have been banned. Of course, this is done to lessen the burden on the tenants.
It is, however, worth noting that these prohibitions are temporary and everything will be back to normal once the virus is contained. Due to uncertainties surrounding the current disaster, we cannot speculate how much some of the investors will lose in the long run. Nonetheless, most governments have put in place strategies to offset the negative impacts felt by all industries during these unprecedented times.
Office Buildings Are Being Vacated
Everyone is now familiar with the phrase "work from home." As a precautionary measure, most offices have shifted their operations to online-based. Therefore, every employee is expected to log in to their work account while seated in their homes.
In that regard, some business owners are weighing on the idea of handing over the keys to the landlords, adopting the current trend permanently.
The real estate sector has been one of the most flourishing businesses over the years. With the current global pandemic, it’s not possible to know which companies will survive.
SARS virus also had an impact on the economy at the turn of the century. However, the effects of Coronavirus have so far surpassed what was felt at that time. As such, the eventual rebound of the real estate business is expected to take a lot longer. It could be months or even years before everything goes back to where they were.