The pandemic caused by COVID-19 has become one of the most impactful global crises in recent decades. The future has become an uncertain challenge, in which all sectors handle uncertainty scenarios. The real estate sector in California is no stranger to the effects of this crisis and it is one of the industries that are being most impacted by the economic situation, uncertainty and social distancing schemes proposed by governments. The current pandemic could change the way people live and work.
Impact on the residential real estate market
The outbreak of the covid-19 pandemic has had a direct impact on the real estate sector and with consequences that time will still have to dictate how far they go. The declaration of a state of alarm in California has caused the almost complete suspension of the activity of real estate activities. The drastic limitation of the movements of people prevents visits to the sales booths of real estate developments, the offices of the agencies and the real estate properties of individuals.
If we focus the analysis on the residential real estate market, the effects of the COVID-19 “contagion” has materialized more intensely in demand and housing prices than in supply. We are starting from a situation very different from that of the beginning of the previous crisis, characterized by high levels of housing stock, both new and used.
The real estate market in California
The real estate sector in California was expected to grow 7% during 2020. However, due to the COVID-19 pandemic, this forecast will be delayed until the end of the year 2021, or even until the mid of 2022. At the digital level, the search for properties has decreased by 40% in the most important portals around the world, in California the drop is 29%. Due to the increase in Business property tax California, the commercial real-estate market has seen a major drawback. In these uncertain times it is important to note that although the volume of transactions has decreased, the sale and rental of properties has not stopped. The real estate sector is changing the way of doing business but not its bottom line and digital tools are the best option to continue moving the market.
- What is happening is that the purchase decision is being postponed, but not the intention to invest, which has increased by 15% in the last semester,
- It should be noted that in November and December 2019, search volumes were lower than those recorded during the pandemic,
- Regarding housing income, members of the sector indicate that approximately two out of every five renewals of rental contracts have been canceled, derived from this lack of work,
- Co-working offices are being the most affected by the initiative of many companies to make their staff work from home,
- The construction of corporate buildings will face a contraction for at least the next few months, until the global economy stabilizes.
Impact on the non-residential real estate market
The non-residential real estate market has also suffered from the corona virus crisis. Since the state of alarm was decreed, shopping centers and premises, offices and hotels have been closed, whose tenants have initiated offline procedures and find themselves with liquidity problems to be able to pay rents. Each of these segments of the real estate sector faces its own idiosyncrasies. As for the logistics sector, we can agree that it is the one that will come out of this situation the best. During confinement, it has benefited from the need to provide and guarantee the distribution and storage of essential products. The rise of electronic commerce, as the only alternative for the acquisition of non-essential products, will also drive the improvement of all technological and storage infrastructures. Read everything here.