Residential Real Estate and Covid-19: How Homeowners Can Breathe A Sigh of Relief
It would have been hard to imagine that a virus would affect half the world a few months ago, and that it would still cause incalculable financial losses in almost every sector of the economy. But we want to know how Covid-19 will affect the residential real estate industry, and what should homeowners take into consideration here onwards. Due to the exceptional pandemic situation, the number of people talking and anticipating a drop in residential property prices is increasing from week to week. There is no doubt that the current crisis is already having its impact on the residential real estate market in Portugal. Much because of current and expected economic uncertainties, some potential buyers are unwilling to burden themselves with a real estate investment. Housing credits will have more valuation requirements than before, and many sellers will wait for better times to sell their properties. It is necessary to inform all players in the real estate market in Portugal that "the so-called housing bubble" does not exist. And that said bubble is not about to burst, nor will residential real estate suddenly lose its value. But what is important to know is that the opposite may turn out to be the case! The Coronavirus’ crisis has made many see how important it is for our home to be a space that is much more than just sleeping ground, it has become our castle. Staying in a private space of our own, with due social distancing and living conditions different from those that were important to us before this pandemic. People want to get back to having a beautiful, spacious, safe home that belongs to them. Demand for residential real estate and its prices are more likely to increase, given the emotional factors. So home owners can breathe a sigh of relief and be more relaxed at this time. There have already been several international studies, such as a study in the German market by Hausgold that goes hand in hand with our thoughts, the german residential market like our own has been rising in price in recent years. 39% of all respondents confirm that the competence of real estate agents is particularly appreciated at this time. A regional real estate specialist can competently answer questions on the topics of selling and buying and thus settle client’s uncertainties and concerns. The professional capacity of real estate agents at this stage of the race is crucial, and we at Casaibéria bet on the defense of prices since nothing has changed in the intention of potential buyers, nor in the costs of construction and acquisition of land before and after the health crisis of Covid-19. We are therefore convinced that only good training and sensible response can help our customers, both buyers and sellers. We will not enter a race of discounts just to follow the opinion of said "experts" who live from crystal ball divination, and who lack a broader view of the subject and the national and international real estate industry. I want to underline three ideas! 1- The real estate market will see a sharp drop in indicators of economic activity. The current recession resembles to a “football match break” in economic activity and should be interpreted and managed as such. 2- The fact that Portugal, from the point of view of attracting international investment, has added health security to its already very good and positive features, which will help us to leverage our recovery. 3- Portugal is still in fashion, and international investment is still interested in investing in our country, this will create new jobs. Employment that brings financial well-being and the one that leads to families to buying their own permanent residence again. Text: Paulo Lopes Picture: Martine Auvray by Pixabay
Portugal less than one percentage point away from reaching its target for renewable energy!
The share of the cake in renewable energy of all the energy consumed by the European Union has risen to 18%. According to Eurostat, in Portugal that slice is at 30.3%, less than one point from the target. Of all the energy consumed in the European Union in 2018, 18% came from renewable sources, 0.5 percentage points more than in the previous year. In Portugal, the share of renewable energy in the total cake stood at 30.3%, less than one percentage point from the target set for 2020 by the Executive. It should be noted that the community target was to have 20% of energy consumption from renewable sources by 2020. By 2030, the European Union wants to see this share increase to 32%. By 2018, 12 of the 28 Member States had already achieved their national targets: Bulgaria (achieved a share of 20.5% when the target was 16%), the Czech Republic (achieved a share of 15.1% when the target was 13%), Denmark (achieved a share of 36.1% when the target was 30%), Estonia (achieved a share of 30% when the target was 25%), Greece (18%), Croatia (achieved a share of 28% when the target was 20%), Italy (achieved a share of 17, 8%, when the target was 17%), Latvia (reached a slice of 40.3%, when the target was 40%), Lithuania (reached a slice of 24.4%, when the target was 23%), Cyprus (reached a slice of 13.9%, when the target was 13%), Finland (reached a slice of 41.2%, when the target was 38%), and Sweden (reached a slice of 54.6%, when the target was 49%). In addition, four other European countries were within one percentage point of their national targets, namely Portugal. According to Eurostat, the Netherlands (6.6 percentage points), France (6.4 percentage points), Ireland (4.9 percentage points), the United Kingdom (4 percentage points) and Slovenia (3.9 percentage points) were the furthest from its target. According to data also published by Eurostat this Thursday, 8% of the energy used to power transport in the European Union came from renewable sources in 2018. Sweden has established itself as the European country with the largest share of renewable energy in the transport sector (29.7%), followed by Finland (14.1%), Austria (9.8%) and the Netherlands (9.6%). Portugal managed to secure sixth place in the European table, with a share of renewables of 9.04%. Source: https://eco.sapo.pt/2020/01/23/portugal-a-menos-de-um-ponto-percentual-de-atingir-meta-para-energia-renovavel/ Picture: Free-Photos by Pixabay
Brits, Germans or French… who visits Portugal the most?
The numbers of tourists coming to Portugal keeps increasing as the British take the lead on being the nationality who visited more the country. They are, then, followed by the Germans and the French. A reciprocal relation, one might say, as topping the Portuguese most visited destinations are France and Germany, despite Spain still being the most visited. According to Eurostat, 14% of the tourists visiting Portugal come from the United Kingdom, spending an average of 75 euros per night and staying an average of 9 nights. Following the British, we find Germans taking second place (9.3%). German tourists in Portugal spend an average of 104€ per night and stay an average of 10 night in the country. The third in the podium are the French (7.2%), staying an average of 9 days and spend an average of 103 euros per night. In a lesser number, the Spanish come also visiting Portugal, despite preferring France and Morroco. 1.5% of the Spaniards chose the neighbouring country as their holiday destination, spending an average of 99 euros per night and staying an average of 5 nights. Source: Lusa
7 real estate trends: 2020 and beyond
Influenced by a multitude of factors and operating in regular cycles, the real estate sector has always been one of the most dynamic, but in recent years the changes have become progressively dramatic with the next decade poised for an even more significant transformation. Two decades ago, the way to recognise agents’ success and the service given to customers was through being an experts in their local market. Nowadays the simple understanding of your own market is no longer enough; it is also essential to be on par with current and emerging and ever-changing global trends in order to maintain the advantage of an increasingly competitive market. Hence we believe that the key global trends that real estate professionals need to know to stay on top are: 1. Urban sprawl and growth of second-tier cities Growth of existing cities is likely to be more prevalent in emerging economies, notably Asia, Africa, the Middle East and Latin America. In developed economies, we will see significant growth in medium sized or second-tier cities, as the continued increase in prices in the top-tier cities forces more people to seek better value for themselves. 2. Changes in government policies and economic growth Government policy and economic growth are key factors, but its local implementation has been especially significant in recent years, with a number of proposals for changing policies related to the environment and economic change and slowdown around it. Notable changes to property tax laws are also included in this section. While we have little control over political and economic decisions, an in-depth understanding of them will allow us to plan a better strategy to protect ourselves and our customers. 3. Demographic change With life expectancy now higher than ever, the overall share of people over 60 is expected to exceed that of people under 15 by 2050. They are also more active at this age than previous generations and consequently will have very different property requirements, which will have a remarkable impact on industry, especially in more developed countries. 4. Millennial market share Home buying by the millennial generation is expected to peak next year, then this generation will represent the largest market share for the next decade. Not only will their first home aspirations boost prices for single-family homes in many markets, but their unique lifestyle needs will continue to change many aspects of the real estate industry. 5. Alternative life Cohabitation, especially in the most expensive cities, is increasing. This is also becoming more common in the workplace, with a report published by WeWork in October last year revealing that in London co-working is rapidly becoming an established trend, with 17% of offices now on a flexible basis. 6. New technologies It has been known for some years that smart home technology is considered the "next most important thing", it is already common both in renovations and new constructions, that many homes are already managed by Alexa or Siri. The new watchword over the next decade is expected to be "affordable homes" and both property developers and investors will be forced to consider the growing smart home robotics industry, which includes features and appliances such as vacuum cleaners and mobile assistant robots. 7. Green is still the new green Sustainability is becoming increasingly challenging and this is unlikely to change given the projection that by 2050 the world will need 50% more energy, 40% more water and 35% more food to sustain the growing population. It is therefore imperative that the design of all new properties is based on "green" or ecological principles, including renewable energy technologies and waste reduction. We summarize thus that real estate was already subject to an expansive number of external influences such as interest rates, house prices and other economic trends. Now having to take into account a varied number of new emerging trends may seem scary, but it shouldn't be. This is a challenge for all of us who work in this business, and it only scares those who are not interested in the need of their client. But as the Greek philosopher Socrates has said; 'The secret of change is to focus all your energy, not on the fight against the old, but on building the new.'" Text: Paulo Lopes Picture: Quinn Kampschroer by Pixabay
UK housing market enjoys rapid recovery 1 month after the end of covid-19 lockdown
International real estate consultancy Knight Frank reported last week in a press release that home buying offers are being accepted at record rates in uk property markets as the traction returns and price pressure slows down in the first month since market lockdown measures were lifted. The number of offers accepted outside the capital was the highest ever on week ending 6 June, up 52% compared to the average for the past five years. In London, the figure was 34% above the average for the past five years and the third highest weekly figure in 2020. Restrictions on property transactions in the UK were lifted on 13 May, after an eight-week period in which physical viewings stopped and demand remained silent. As the UK came out of the lockdown and the impact on the labour market was becoming clearer, the housing market and its performance improved. The number of new potential buyers continues to increase. For markets outside London, the figure was the highest since May 2018 and was 14% above the five-year average. In London, the figure was 54% higher than the average of the last five years, but lower than the levels recorded earlier this year when the post-election bounce had an impact. The price is reason that markets outside the capital are currently hitting record highs. Reflecting that, prices outside London have been more realistic for a longer period and are therefore now showing more resilience. House prices outside the capital peaked in the third quarter of 2007, however they remain below this high point and growth has been moderate in recent years. Meanwhile, London prices are now between 20% and 40% above the peak of the pre-financial crisis of 2007, as shown in the chart below. This price differential has been coupled with a trend for more buyers to seek outdoor space. While virtual viewings for properties in London were 13% below the five-year average in the week ending 6 June, outside London there was a 13% increase. Relatively tight supply levels have also put a brake on price pressure in the first month since the housing market reopened, but more equilibrium is expected to return in the coming months. https://www.worldpropertyjournal.com/real-estate-news/united-kingdom/london-real-estate-news/london-real-estate-news-knight-frank-2020-london-property-market-report-covid-19-impact-on-london-property-sales-damian-gray-shaun-hobbs-11989.php Text: Paulo Lopes
Real Estate - What is the strength of Real Estate compared to other forms of investment?
The sharp drop in the stock market in February-March has shown that the real estate asset can continue to be a safe haven. The lower profitability of real estate also mitigates any immediate impact on prices, since it manifests itself in existing ones, which are much more volatile. An investment in real estate is never made to last only one year, but in most investments, a form of capital investment that yields long-term returns, sometimes during twenty or more. We recall that between the last crisis of 2008 and the present one only twelve years have passed, and that even if the properties will suffer some decrease in price we still have 8 years to recover! The certainty of historically low key interest rates, thanks to the European Central Bank (ECB), is also a supporting factor. The rates of housing credit in Portugal take into account that of Treasury bonds (the 10-year OAT), which remains close to 0.5 %. Then there will be strength and capacity for a brief recovery. The weekly newspaper Expresso published on 23 May, in a major article, stated that the residential heritage of families had not stopped increasing since the 2011/2013 crisis. And that its acceleration was particularly evident in 2018 and 2019, having risen by almost 19% in the last two years. These data come from the annual series of household wealth recently updated by Banco de Portugal. These make it possible to assess, at market prices, the wealth held in housing and adjacent land by households resident in the country. The turnover rate of the residential market in Portugal has remained constant in recent years, excluding the 2008 crisis phase. It has also been seen that private wealth in Portugal at the end of the 1980s was 70% and now no longer accounts for 50%. However, new factors have emerged and long-term leasing will grow, a natural consequence of which will be more real estate transactions for this purpose. The rate will persist in the long term, even with the impact of a fall resulting from two months of inactivity. With a forced confinement for more than two months, the housing needs of households remain unchanged. In any case, the price inflation, feared at the beginning of the year, will be avoided! Coronavirus has calmed the residential market. Buyers will probably put themselves in a position of weighting, sellers who are not in a hurry will be tempted to withdraw their property from the sale. A drop of 10 to 20% in prices may come about, above all and especially in compulsory sales caused by divorces, inheritances, reinforcement of equity capital and financial liabilities such as credits. A faster recovery of the housing market after the crisis is also possible if the stock market remains volatile and buyers feel they can buy at more attractive prices than in early 2020. The big unknown here remains the real behaviour of banks in designing credits, despite the clear incentives of the ECB. The new function of real estate has expanded and gained even more significance in the face of the health crisis. Remembering the popular saying "Better a bird in the hand than two in the bush", meaning that with the instability of the stock market real estate investment has always been safer than the promises of brokers, and thus a safe haven for my capital. It may also have the function of a retirement savings account applied to real estate and real estate funds, as they have been the most resilient during the health crisis, and whose effect, compared to stock market-based funds, is even stronger than before. Being aware that money is protected by acquiring and maintaining property, and also having a comfortable home that provides physical protection, especially against the virus, makes us understand that the idea of a property has been reinforced. Thanks to teleworking, a cottage less than two hours from your place of professional activity can also become an office, a balance between pleasure and daily work. Our starting point as a Casaiberia company will be the preparation for the reinforcement of sales from September onwards, when we believe in a significant resumption of activity, and take advantage of the summer period to quantify the magnitude of the consequences of the crisis, leaving behind the issue of the temporary reduction of prices, as time remains timely. Text: Paulo Lopes Picture: Jason Goh by Pixabay
Real Estate - Where do the trends go?
We had finished our last article with the following statement: in tense markets like that one of our capital city, Lisbon, and the Algarve, there is not enough supply in relation to demand and the natural clientele has higher income and greater financial strength. We estimate that a correction and adjustment of values in the order of 5 to 10% of prices in Lisbon, Porto, Braga, Coimbra and the Algarve is likely. In medium size cities our opinion follows a little the data of idealista.pt which highlights a decline that can be twice as big, because the families living there sometimes have less solid financial situations. Can this perspective be compensated, due to the lived experience of confinement, by the recent aspiration of families to settle away from big cities and in a more comfortable living environment, less dependent on long trips on public transport? And the sudden charm of the extra office room in your home? Surely a simple interest due to the experience of lock-down will not necessarily trigger na actual purchase. This hypothesis described above only applies to those who can telework. Banks, which have focused on assisting businesses, are now more resilient to home loans and private loans, this may become a problem for the real estate business. The increase in traffic on sites to areas further away from major cities reflects curiosity, but does not mean a predisposition to purchase. The driving force for acquiring real estate is trust. However, this is being put to the test, with the sudden closure of the economy, the increase in unemployment, the decrease in income. Fewer volumes, fewer buyers, this could mechanically lead to a momentary drop in prices of 10 to 20% with an increase in disparities, especially geographical and between types of real estate product under construction, new and used. The portuguese real estate market is structured as follows: 55% of purchases are necessary, 30% are investments for rent and/or pure investment and 15% in second homes. Main home buyers will have the greatest distrust at this time, because it is the most important investment of their life in their own permanent home. Investment purchases will resume in October at the latest, for tax reasons and because of the need to invest capital in real estate assets. The purchase of the second home and the holiday home may come as a surprise to the market, taking into account the experience of the last few months many had wished to have a small house outside the dense urban perimeter where they were confined. This is true for the national client as well as for the international client. However we believe that we will have a phase of feeling the terrain both for seller and buyer, to meet the price and the needs of both, this will be reflected in the price of the property. We expect a moderate drop in prices until the end of 2020 and, above all, a severe drop in the volume of transactions due to lack of time to recover the three months in which we were forced to press the pause button, and that it will not be possible to recover in any way before 2021. Text: Paulo Lopes Picture: The Lazy Artist Gallery by Pexels
Real Estate: Where do prices go?
The health crisis has created an unprecedented situation. The real estate market has stagnated, transactions have not yet resumed, now it is good to know what will happen to the prices. The housing market came to a standstill on March 18th , when mandatory confinement and a state of emergency were implemented by the Portuguese government. This deprived us from visits and real estate transactions. Now we are leaving the pause mode and resuming our professional activity. On May 18th we started, in a first phase and with the proper social distance, making visits to the properties and we feel a fresh start of the activity. It is mainly since June1st though that, by maintaining the restrictions on our activity as ordered by the DGS, the resumption of activity was indeed possible, especially thanks to freedom of movement. The two-and-a-half-month period that has just passed has plunged all players in the sector - professionals, buyers, sellers, landlords, investors, tenants - into a virtual paralysis that digital tools only partially mitigated. What does the future hold after this brutal shock? What economic consequences will be felt in the coming months? No historical comparison is really relevant. But from September 2008 (Lehman Brothers bankruptcy) to the Spring of 2009, the housing market collapsed due to a lack of transactions, before adjusting rapidly from mid-2009 to summer 2011 (euro crisis). On the eve of a gradual return to normal life since the beginning of June, the outlook for the housing market is still hard to imagine. Has this pause imposed on our sector broken the positive momentum brought by sales volumes and real estate prices, which still present at the beginning of the year, and which was part of a favorable trend since 2016? Or will the health crisis create a lasting shock that will severely dampen activity and lower prices? There is no reason to assume that the real estate sector is not affected by the impact of a crisis that has destroyed the economy. However, the purchase of a property is an investment that represents many years of net income and for which the buyer can assume 20 or 25 years of debt. With the economic shock, this health crisis will inevitably affect the purchasing power of households, especially in the event of a nearly 10% increase in unemployment after lockdown. Comparing our market with some others especially in Asian countries that have already left the lockdown about 2 months ago, the market will in some ways suffer a drop in activity of about 30% compared to 2019, both for resale and for new purchases. This is because our 2020 real estate year will realistically have 9 months. With a loss of more than two months, expectations of a shrinkage in household incomes and a slowdown in lending, the number of real estate transactions will decrease. With the possible exception in the most emblematic and prime assets in larger cities such as Lisbon, Porto, Braga, Coimbra and the Algarve region. In tense markets such as our capital city – Lisbon - and the Algarve, there is not enough supply in relation to demand and the natural clientele has higher earnings and greater financial strength. We estimate that it is likely to see a correction and adjustment in prices of circa 5 to 10%. In medium-sized cities, our opinion is a little more close to that of idealista.pt which highlights a decline that can be twice as large, because the families living there sometimes have less solid financial situations. Text: Paulo Lopes
Patience is the word of virtue for real estate in Portugal!
Sellers should be patient as time goes by and the market adjusts to the effects of the crisis. It is said patience is a virtue. Property sellers trying to offload their properties during this COVID-19 crisis may have to take those words to heart. Mid-May is usually the time of year when homes tend to sell quicker, as spring represents a new life and personal fulfillment after the winter period. With the pandemic of the coronavirus and lock-down for nearly three months, the lack of foreign investors, the rising of unemployment rates and the likely economic downturn are dramatically slowing the housing market. In March we were still in full swing to achieve a record year, with a demand much higher than usual comparing to similar periods of the previous year, which in itself were already an extraordinary result for real estate in Portugal. Was all this in vain? And now because of a health crisis everything has changed? For buyers, it is now a phase of analysis and prospection to see how the housing market will react to this new reality. For sellers, it is a phase to be patient and it just means that they must be prepared to expect a much slower sales process. On Thursday 4th June there was a very interesting videoconference from SMARTUS, in which Margarida Caldeira of Broadway Malyan explains that in Asia the markets are already resuming a similar pace as before the crisis, and Francisco Horta e Costa of CBRE confirms that the effects of the crisis are already being surpassed gradually in countries such as China who were first hit by the new coronavirus and had to face the consequences on the economy much sooner. However, they have already resumed their economic activity a few months ago and show a significant recovery in the real estate business. Pedro Coelho of Square Asset Management also of the idea that the money for the investment has not disappeared, and that it will have to be applied, because there are no alternatives. There will certainly be new trends that we will have to follow in the real estate industry and we can learn from countries like Singapore, Taiwan and others in carrying out these new realities. The real estate market is not just a challenge for sellers. The number of new home listings also fell by 28% compared to the same period in 2019, as such it is more difficult for buyers to find the properties they are looking for. This may be surprising for many people, but prices have not gone down and, to date, prices remain at the same level as at the beginning of the year. And why is that? Although the economy is currently struggling and unemployment is rising as well as the high overall uncertainty, there are still more buyers than sellers. This imbalance could result in the keeping of prices in the coming weeks and months. This is also confirmed in the table below published by the website Idealista.pt showing the sales price variations in Portugal. TEXT: Paulo Lopes
A new study says that when there are no safe alternatives, real estate remains the best option!
Investment alternatives are lacking A study carried out in Germany says that the real estate boom will continue after the short phase of distrust partly thanks to the system of working on lay-off and telework. A Coronavirus pandemic has paralyzed economic life in Germany and across Europe for weeks. Real estate markets have also not managed to escape coming to a Halt. We shan’t forget that total real estate investment in Europe reached 85.5 billion euros in the first quarter of 2020, which represents an increase of 52% relating to same period last year, according to the latest data from global real estate consultant CBRE. This was a record performance for the European CRE in the first quarter, surpassing the previous record which dated from the first quarter of 2015. Temporarily, property prices in Germany will stagnate, Commerzbank research writes in a study, this also serves as an example for other EU countries. The record performance of the first quarter of 2020 that we have seen across Europe serves to highlight the strong appetite of global investors for real estate assets. The repercussions are expected to be significant only in the short term, with the ability and opportunity to emerge in the medium and long term as the sector begins its recovery. Real estate enters this period of uncertainty in good shape and will continue to perform well in the long run, because there are no investment alternatives. From a sectoral point of view, it is expected to continue to have a strong demand for commercial and residential assets across the European Union. The Commerzbank’s study anticipates that by 2021 prices will rise again. The reason for this clear statement is that the main drivers of the housing boom of recent years have not been lost according to the expectations. Citizens face temporary loss of income The Commerzbank study also has a message of comfort for workers. Since the inevitable loss of income resulting from the Coronavirus’ crisis is probably less than the fear of the imminent fall in gross domestic product. The authors refer to the experiences of the financial crisis of 2008 and 2009. In 2009, economic output (GDP) fell by circa 7%, but disposable income per capita decreased by only 2.5% in the fourth quarter of 2008. After that, they remained stable until the end of 2009. Since 2010, they have increased again, this trimming of public debts and high interest scenarios for some of the member states but not for all. This scenario will not be repeated according to the European financial policies that are moving towards a project to encourage the joint economy in the euro area. This will have a common effect, meaning that both Germany and the other member states will be side by side to get out of this crisis caused by the virus, and that after all, it is not a financial crisis, but a health crisis, with consequences on the economy of all member states of the European Union. House prices only temporarily under pressure The study states that it is highly likely that house prices in Germany will remain largely stable. The authors of the study do not want to overestimate the pressure on prices in the housing market caused by the Coronavirus’ crisis. They also point to a long-term trend: already in 2019, the increase in property prices in large cities has declined. This was also a fact in the Portuguese economy, in the last quarter of 2019 it was the first time that there was a downturn of prices compared to the same period of the previous year and the previous quarter. For the first time in a long time, growth rates fell short of average. ECB's loose monetary policy boosts house prices Commerzbank's study cites the "loose monetary policy of the ECB and other central banks" as an important factor in the recovery of housing markets. ECB President Christine Lagarde stressed that "there are no limits to our commitment to the euro." Similarly, the U.S. Federal Reserve (Fed) has adjusted its monetary policy. According to the authors, the trillions of central bank aid lead to "investments in real estate becoming increasingly attractive." In addition, currently exceptionally low construction interest rates make real estate affordable. The study refers to the so-called accessibility index. So, buying a house is cheaper than ever in the past, and this will not change in the medium term. Text: Paulo Lopes
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