Although the coronavirus pandemic is a human crisis, above all, it would be wrong not to give any opinion about it to our clients, about the implications it may have on the national and international real estate market, in the short and long term.
We have understood over the last few weeks that now more than ever, clients need an honest assessment of the market. CASAIBERIA will continue to inform you about what is good and what may not be good in the purchase of a property by our clients and will help, as it has always done in the past, our clients to achieve the best possible terms in any purchase.
That's why we thought we should go a little deeper into the Portuguese and international real estate market, which we have been studying carefully and not only since the beginning of the crisis, but for many years now.
How was the national market progressing before the pandemic?
According to some studies made in December 2019 the market was cooling down a little as a result of the rise in prices in the national real estate market. We are the country after the Philippines, where in the last quarter of 2019 prices rose more than in other countries worldwide. However, we are the fourth country in the list of those that were less indebted last year in the purchase of real estate, which means that the Investment is on the rise, and that in a certain way has not ceased to be relevant even with the Covid19 crisis. This trend is always based on a long-term strategy, which results in continued demand for real estate and investment in Portugal. This is said because the RICS and Confidencial Imobiliário study "The Portuguese Housing Survey", confirm this with the continued demand and increase in the months of January and February 2020. Therefore, no doubt it can be said that confidence and activity have returned throughout January and February. From our point of view the market will adjust a bit in prices, but in the long term the market will revive and within 12 months return to normal levels.
The real estate market has reached a virtual standstill, that is, frozen because it lacks the possibility to be with the people and with whom it makes decisions in a personal way. We can't make viewings with the clients, but we show with our videos, who is like us confined, what awaits you.
We have been doing business that was already underway, with the great help of our lawyers, friends and partners, whom I would like to thank in this way for their tireless support of our clients and their willingness to do deeds on behalf of the clients, who are sometimes confined abroad and who, with full confidence, let us handle everything on their behalf. Also a big thank you to the notaries and public notary who have been able to open their facilities for the realization of these businesses so important to us, CASAIBERIA, and our clients. And we continue to have demand and proposals from clients who have already been here or who have decided, based on the images and videos, to come forward with proposals to buy right after the crisis and move to our country. The same is happening with Investors, who have not stopped contacting us to analyze at this stage, how and when they will invest the capital they have available in a next real estate investment operation. During this phase of confinement and homework, CASAIBERIA and its employees have already managed to exceed the magic number of 500 properties for sale. This means that, from March 9 to April 16, with the help of the CASAIBERIA Team, we have managed to carry out 82 fundraisers taking into account that on March 9 there were 449 properties online and today there are 531 properties for sale. This is a clear sign that the market has not frozen, it is different and there are fewer people working, so we think that the time after the crisis will be the same, or little different, from the previous time for the Portuguese real estate market, and that if it does not normalize within the first two quarters, it will certainly return to normal after 12 months. Real estate investment is never, and never has been, in the short term but rather in the long term.
A side effect of this pandemic is the return of many properties that were being rented, through the local housing scheme, to the long-term rental market. This will certainly bring down rental prices, but only this year, next year, they will return to the market again because seasonality will cause it, thus confirming our CASAIBERIA expectation that everything will normalise at the most within 12 months.
Has COVID-19 already affected house prices?
It is still too early to answer this question. However, the lack of product and the growing demand in recent years, combined with the delay in the licensing of works by municipalities and authorities responsible at the national level, may today be a very important factor so that there is no such brutal drop in prices as there was in the previous financial crisis. Therefore, we must realize that we are not in financial crisis, we are in Lockoff because of a pandemic, caused by a disease that spreads very quickly and especially affects the most vulnerable in our society!
But it is also necessary to understand, so cold and rational, that derived from their age, their illnesses and other factors that make their immunity more limited than that of many others who overcome this disease. In reality, very few are investors or buyers of real estate, so it is only rational to resume that the age group that is currently less affected by the disease and will continue to follow their dream of having their own home, second home or simply investment to preserve their own lifestyle, that of their family and employees, will remain and with it their interest in investment.
Property is an illiquid asset and housing prices are not subject to the daily fluctuations of the financial market. We assume, as CASAIBERIA, the idea that once the market reopens, there will be a time to discover the ideal price, because both sellers and buyers will need some time to digest this new situation. Once again it is necessary to assess that we are not in financial crisis, but in a Lockoff period to protect lives. The willingness to buy real estate will remain, because from the time of the stone man wants his own nest and his own walls, and it will not be COVID19 that will change this rudimentary and ancient instinct of human society. But the banks, who live off credits granted, will also reevaluate the acceptable level of risk. We CASAIBERIA with the meetings and brainstorming we've been having over the past few weeks hope that this will suppress transaction volumes in the first few months after the lockout.
What will happen to housing prices?
After all we can't, as CASAIBERIA, say what will happen with prices, because we don't have a crystal ball to look at. Nobody can predict at this time, or know the extent of the economic damage that COVID19 will cause, as well as all the effects that may be reflected in the markets. But we know that both the European Union, whose President Ursula von der Leyen was clear on this today, the Portuguese Government and all the other economic players in Europe want to secure their position and share in the international market, as well as employment and their multinational companies. We therefore believe, as CASAIBERIA, that in this area too there will be a necessary 12 to 24 months to return to normality. But we also see, as CASAIBERIA, some positive side effects, such as: the way in which Portugal is being seen in the international press, in matters of security and health safety compared with other countries in Europe. There is a change in the paradigm of employment at a distance, the environment and many other factors that may be beneficial to our sector.
That said, this is our opinion, as CASAIBERIA and its team, on the real estate market in 2020.
But everything has a worst-case scenario and we do not want, as CASAIBERIA, to ignore that possible scenario.
With rising unemployment many companies will seek to reduce wages - this will directly influence people's incomes and as a result there will be pressure on prices. However, this is all the trade unions don't want and the current government will seek to counter it!
After large amounts of credit have been granted to companies to safeguard their workplaces and their activities, there will be an uncertain lending environment - will the banks impose stricter rules on the design of credits on individuals and companies, and will they be somewhat more conservative in their assessments?
With economic losses already occurring in the international and national economy from the Lockoff phase for several months, there will also continue to be losses in the national and international economy as the world returns to normality after the virus. The IMF and other major international bodies are predicting the worst economic crisis since the Great Depression. We Portuguese know that the IMF has not always been right in its expectations, at least for Portugal. But even at best, we cannot fail to see the reality of the economic losses. Clearly they are going to be very significant and the recovery is no longer predicted in the same way, with a "V" shaped recovery curve, CASAIBERIA no longer considers it the most suitable.
Text: Paulo Lopes