The pandemic's ravaging effect -
How real estate is affected by Covid-19
2020 is nothing like the year we all hoped for.
2020 is nothing like the year we all hoped for. The novel Coronavirus disease outbreak has rigorously painted a picture in our hearts, one that can’t be easily erased. Even the world’s most influential countries and the most stable economies became unstable, uncertain of what the post-covid era will look like, if there will be one.
Virtually every market and industry was deeply affected, and the property market was no different.
In Germany, for instance, the property market experienced what could be called the biggest decline in real estate activities during this period.
How real estate is affected by Covid-19
Let’s take a closer look at how real estate is affected by Covid-19.
Over the years, Germany’s real estate market has experienced major growth and developments. With the demand for real estate exceeding its supply, the real estate industry has been enjoying a historic level of success, but this was cut short due to the significant decline in real estate activities all across the country and worldwide due to the pandemic.
Owing to the contagious nature of the deadly disease, the government had to enforce some measures to help curb its spread, and we all can agree that it’s a step taken in the right direction to ensure the health care system is not completely overwhelmed by the effects of the virus. Some of these measures included the restriction on gatherings, social distancing, and the king of them all; Lockdowns.
Trends in Real Estate Transactions
While these measures have proven to be very effective, we also can not overlook the gruesome effects it has had on the normalcy that once existed, especially in the real estate sector.
Given the strict adherence to these measures and the economic uncertainty at this time, there has been a conspicuous drop in home sales all over the country.
Property buyers have greatly reduced their buying activities and this has led to a reduction in the demand for housing, agents, and brokers. With few buyers looking to buy properties, and even fewer sellers willing to sell, the ever buzzling real estate market has become a shadow of what it once was.
Long-standing experienced real estate agents wanted to look after existing customers!
Influene of the corona condition on real esatate sales
The restriction on movement made it impossible for buyers to fully inspect their potential Investments. The online showings and socially distant viewings were just not enough to convince a prospective buyer to purchase a property. No one will opt to pay several thousands or millions of euros by merely seeing videos and images of real estate. It just couldn’t be compared to the old system of being physically present to inspect every nook and cranny of your potential investment. This has led to a massive reduction in demand of real estate, which means that a drastic price fall in properties is looming.
On the other hand, sellers became reluctant to open up their doors to strangers who would inspect their property for fear of contracting the virus. Thorough researches have also shown that aside from health-related concerns, the overall economic uncertainty and the difficulty in buying a new home during this period were the main reasons most sellers chose to stay away from the market.
Direct effect of the situation on Real Estate
Covid-19 has also taken its toll on homeowners, who now find it extremely difficult to keep up with their mortgages. The tenants aren’t paying their rents either, and all these are closely linked to the rise of unemployment due to the pandemic.
The total lockdown has also slowed down work on construction sights; buildings aren’t springing up like before as Engineers, architects, and laborers have all been forced to sit at home for the sake of their dear lives. This has affected the structural development of real estate because existing properties won’t be renovated, and new ones can’t be built.
Even though banks have lowered interest rates due to the looming crisis, Investors who are looking to get mortgages to finance their real estate investments have been frustrated by how much time it now takes to process mortgages and this is as a result of fewer bank staffs on duty, combining the logistical distribution of state aid with the normal day-to-day activities.
Analysis of a post-Covid Real Esatate market
Currently, there has been a massive reduction in the number of Covid-19 cases, and life is gradually returning to what was during the pre-covid era. However, there are fears that this whole pandemonium might have left an indelible mark on the real estate sector. For instance, there has been an unavoidable surge in the number of people who now work from home. This could see a significant decline in office space demand because people now believe they can achieve more from home.
Also, activities on the internet greatly increased during this period, and this has also led to the unprecedented success of E-commerce stores. The fear is that this sudden rise of E-commerce stores will destroy physical retail stores, and the demand for shopping centres, and retail centres will diminish.
Having seen how real estate is affected by Covid, many have argued that this is a perfect time to invest if you have your financing sources sorted, because there is a possibility of getting properties at a reduced price.
It’s unimaginable how real estate is affected by Covid-19, but we continue to fight and hope for the best as the future of German real estate development remains uncertain.
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