Like any market, the development of the real estate market
is cyclical and goes through several stages. Although there is no sure way to
predict its development, being aware of general market trends is important to
make an investment. smart in the field of real estate. History has shown that
the past and the present reveal much about the future. The COVID-19 pandemic
has had and continues to have a dramatic negative impact on the world economy
and has been cited as the main source for the global crisis that financial
markets have suffered.
An estimated 2.7 billion people, or in other words more than
4/5 of the global workforce, are directly or indirectly affected by the
temporary suspension of commercial activities, their reduction, or the
performance of work from home.
Restrictive measures imposed to prevent the spread of
COVID-19 brought about a shock to fuel demand. The International Energy Agency
(IEA) states that the decline in global demand in April was about 30% of
demand, followed by another significant decline in May. [1]
According to the latest WTO forecast, the volume of global
commodity exports in 2020 could fall to a level comparable to the period
between the late 2000s.
Stock markets have fallen by over 30%; equity volatility has
increased to crisis levels; [2]
The difficult situation that global markets around the world
are facing has undoubtedly created confusion among real estate investors. The
latter are faced with the dilemma that worries everyone, whether it is the
right time to invest, and if so, is it a good idea to invest in real estate?
Taking into account the local real estate market, it can be
said that currently there are no significant and influential developments in
this sector. Over the years, the demand for residential real estate has been so
high that it has exceeded the supply of the real estate market in some regions
and cities. So, although demand is expected to decline as a result of the
pandemic, it is not expected to have a serious and long-term impact, as housing
demand will continue to exist. The reason why the pandemic does not seem to
have had a significant impact on property prices at the moment is relatively
simple: real estate does not lose its attractiveness to investors even in times
of crisis. A home can be considered a sustainable investment even in times of
crisis.
There is not yet an accurate forecast if there will be a substantial decline in real estate prices as a result of the global crisis caused by the COVID 19. pandemic. What is worth noting is that we may see a temporary decline in demand for buildings that serve as offices, this as a result of the closure of many commercial activities but obviously also as a result of the transition of work processes from office premises to home premises.
How fast can the impact of a crisis on the real estate
market be?
The emergency situation that the country and the whole world
are going through will undoubtedly be reflected in the real estate market. This
is because the real estate market is closely linked to the purchasing power of
investors, be they individuals or companies. Phenomena such as pandemics or
other emergency situations create uncertainty and undoubtedly have a wide
negative impact on the reduction of purchasing power, as a result of rising
unemployment and the suspension or reduction of commercial activities.
In Albania, certain segments of the real estate market,
mainly related to housing, continue to remain stable. On the other hand,
despite the fact that the population density and the largest number of
companies are concentrated in Tirana and Durrës, it is observed that has a stock
in the market of offices and commercial premises.
Will real estate prices go down because of the coronavirus?
Preliminary data on the real estate market show that real
estate prices are expected to decline due to COVID-19, but the level of impact
may be different for different countries, given that not every country has
responded in the same way the global pandemic. In recent years, the real estate
market in Albania has had a very positive evolution and has reflected a lot of
dynamism, both in the volume of purchase requests and the volume of offers for
the sale of real estate. This situation has been linked to many factors, such
as improving living standards, increasing purchasing power in urban areas, low
interest rates or easing the conditions for obtaining credit.
However, it is thought that the pandemic may reduce the demand for real estate purchases. Job security, or the economic situation of buyers are two main factors that directly affect the decision to buy or not a property. Buyers may delay the purchase of property due to financial difficulties they may face due to the pandemic, such as job losses, reduced hours, reduction or suspension of commercial activity, etc.
Is it good to invest in real estate in times of crisis?
History has shown that in times of crisis the largest number
of millionaires of the future are produced, as the latter are investors looking
for opportunities, or in other words potential buyers of strategic assets,
which in times of crisis have a reduced price.
However uk is advised
to proceed with the purchase of a property only because the market is
overheated and it is thought that the opportunity should not be missed. Buying
a property requires a broader and more careful analysis to make this important
financial decision. It is not advisable to withdraw liquid from savings to buy
any real estate, simply because interest rates are low. And if interest rates
are high, it does not mean to influence as a key factor in decision-making to
cede an investment that would have economic benefits in the future.
Investing in real estate in times of crisis can be a
successful strategy when it comes to:
(i) an asset with an attractive location, central area or
strategic location
(ii) has a price 15-30% lower than the market,
(iii) is an asset that has the ability to generate revenue
even in times of crisis
(iv) can be resold in time of prosperity at a price of at least 15-30% more expensive.
Conclusion
· When an investor chooses to invest in real estate, the
analysis of the situation in which the development of the real estate market is
located is extremely necessary.
· Various crises which have a negative impact on the real
estate market should not scare investors, but make them more cautious.
· A basic knowledge, or prior consultation with real estate
consultants, will potentially increase the opportunity to make smart
investments which will enable the generation of planned profits.
· Macroeconomic indicators are useful to create a general
idea. In order for an investor to be successful in the real estate market, it
must be clear what his financial goals are and what makes a potential deal
worthwhile to achieve those goals.
· Also, a preliminary assessment needs to be made of what is
happening in the specific area where the investment is intended, and how an
offer can be made appropriate to the situation in which the real estate market
is at that moment, aiming to minimize financial losses. from such an offer.
· All of these are factors that need to be carefully evaluated to make a profitable investment in the real estate market.
[1] https://www.bruegel.org/2020/04/covid-19-is-causing-the-collapse-of-oil-markets-when-will-they-recover/
[2] http://www.oecd.org/coronavirus/policy-responses/global-financial-markets-policy-responses-to-covid-19-2d98c7e0/
