This year 2020 has caught us all by surprise. The health crisis produced by COVID-19 has affected the global economy at all levels. The real estate market, the most important in the Spanish economy, has also been affected, especially the price of housing, rental prices and the supply and demand of the different real estate activities.
skymarketing.com.pk strives to be Pakistan's biggest real estate developer ever, guaranteeing the highest international standards, prompt execution, and lifetime customer loyalty. With projects like https://www.skymarketing.com.pk/rawalpindi/blue-world-city/
The evolution of the economy in our territory has a great connection with the housing market. And it is that the decrease that the national GDP has suffered will be reflected in the real estate sector until approximately 2022.
According to a study carried out by the consulting firm Forcadell and the University of Barcelona, the price of housing will plummet by 16% between January 2020 and December 2021. These decreases will have more impact in those cities where the predominant economic sector is tourism and restoration. On the other hand, this fall in the price of housing will be less serious in large cities where investors are betting on them and where citizens work in specific sectors such as agriculture, industry or public administration.
The large capitals, Madrid and Barcelona, will suffer a great decrease in the price of housing that will be between 13% and 12%. By having a source of periodic investment in these areas, the decline that these capitals will suffer is less than the average. If prices fall in these environments, investors will see opportunities and prioritize based on the area of the city and the price set. Therefore, these cities will always have an interested party, a good buyer who bets on them.
The state of the rental market and its changes
If we examine the rental market we see that it has undergone tremendous changes during 2020. Not only with prices, but also with the relationship between supply and demand.
At the beginning of 2020, rental prices were increasing by 5% according to Fotocasa data , but in turn the market reflected that the rental price would begin to fall with the arrival of the health crisis. But this downward trend had to wait a few months since in April and May vacation rentals came on sale with a price above the average and this caused the increase in the price of rentals that rose to 12% year-on-year.
Many of the vacation rental owners listed their properties as residential rental. This situation produced a turning point in rental prices. The rental market needed more supply to regulate the price naturally, and the vacation rental and its prices higher than the reference prices were responsible for this not happening. But, it is not the only measure that must be taken for a complete regularization of rental prices, regularization policies are needed to help limit prices and have a fairer rental market.
At the end of 2020 we could see a significant moderation, leaving the average rental price in an increase of 5%. Of course, although in total it is an increase in the rental price, in many communities prices were falling significantly.
The price of the rent falls more than the price of the house
Between the periods marked above, January 2020 to December 2021, the price of recent rentals will decrease by 18%. A figure much lower than the price of housing that will fall on average by 16%.
Due to these data, the roles of cities change when we talk about renting a home. As we have commented previously, in the main cities of the Spanish territory, Barcelona and Madrid, the price of housing falls subtly due to the projected investment in these areas.
On the contrary, if we talk about the rental price of housing then we see that the supply grows due to the scarcity of tourism. The rental price drops considerably after having reached maximum rental prices during the years of the housing bubble , no such expensive rental prices had been recorded until then.
Madrid, Barcelona and the rental price
According to a study by Fotocasa, the decrease in the rental price in the Community of Madrid is -5% year-on-year and in Catalonia -1% year-on-year. One of the fundamental economic activities in the capitals is tourism, and being a year where travel was practically prohibited, many of these flats destined for vacation rentals have been left empty.
If we analyze the cities in more detail and focus on the districts of these cities, the areas located in the center of the city and the expensive areas will be the worst offenders in this crisis. In Barcelona these districts are Ciutat Vella and L'Eixample and in the city of Madrid they are Centro, Chamberí and Salamanca. Due to the economic crisis that the country has suffered, many businessmen and workers who lived in these areas have had to move to other neighborhoods due to the loss of their monthly income.
Nor should we forget that the new law that regulates the rental price in 60 municipalities in Catalonia has helped the rental price to fall sharply. This law has influenced the rental price but it is not the only reason, and it has helped to reduce the rental price since the summer, but it is not the only trigger.
The great offer of vacation rentals due to the lack of tourism together with the changes of residences due to lower income issues have also influenced this decline. The fact that there is more supply than demand in the rent has caused prices to fall and continue to maintain that downward trend. In other words, a natural trend in the rental market in large capitals due to the pandemic and our current situation.
But, the reality is different in other Communities such as Murcia, Cantabria, Asturias or Castilla-La Mancha. In these Communities the rental price rises sharply, with increases of up to 10% as is the case in Murcia.
After the pandemic, what is more interesting to buy or rent?
We know that the health crisis suffered this year has left its mark on us, and also on the real estate market. This pandemic has increased the desire to buy a home and the interest in renting a home has decreased. The demand for home purchases has increased since February and this is something that the real estate market must value.
This demand is made up of people who before the pandemic were not considering buying a home. But the confinement has made them see that the property in which they live does not cover the desired needs. The trend of high demand for home purchases will be marked at the end of 2020 and will continue throughout 2021.
Resources:
Only 6% of homes in Mexico are insured
Seven facts you need to know about the real estate market in Culiacán
9 characteristics that successful real estate professionals
Listen to the 6th Real Estate Sharks Forum: Women of Real Estate