The year 2020 was anything but ordinary.
The crisis that defined the past year has a toll on several industries, and real estate is not an exception. To say that the pandemic affected economies and society at large would be an understatement.
However, even with the unfavorable economic climate, the real estate sector has continued to hold its own. Despite the lows, there is still room for lucrative profit in real estate investment, especially in Asia.
House prices go up and down
Before the pandemic, real estate market analysts predicted that mortgage interests would remain low, while prices would continue to rise slowly. The federal government’s shutdown and measures implemented during the wake of the pandemic forced the industry to slow down.
With limited homes on the market and a decline in buyers’ interest due to holding off their real estate investments during such harsh times, mortgage interest rates have decreased in some countries and, thus, sending a cold shiver down many investors for the coming years.
At the beginning of the pandemic, house prices were temporarily static. In April, home prices rose by a meager average of 1% across Asia, specifically in places like China. However, prices moved up to a 3% growth rate in May’s final days.
According to Knight Frank, places like Singapore continued to show sales, where 1,081 homes were sold in March. Yet, this was a lot less than previous years, as it was down 33% on the same month in 2019. For pricier homes, this was down 53%.
When it comes to luxury homes, values had all declined in the first quarter of 2020, from Bangkok to Hong Kong. With Chinese buyers playing a huge role in the luxury property market in places like Bangkok, there was a steep fall, with a dip of 4.3% compared to a year ago.
However, not all countries were as bad as Tokyo and Seoul — early hotspots of the pandemic — witnessed a small 2% increase. Moreover, Taipei, which has been incredibly successful with its efforts in preventing the virus from spreading, saw home prices soar, with numbers going as high as 9% in the first quarter. The same was seen in Manila, where home prices rose more than 15% year-over-year.
Low mortgage interest rates
In May, most countries in the world saw the lowest average interest rates in years. Analysts have predicted that the interest rates might take a long while before they increase, yet fortunately would not go lower than what is currently are.
Low mortgage interest rates are beneficial for sellers and buyers. The lower the mortgage rate is for a country, the more likely people will spend and invest. Homebuyers can also find it easier and faster to pay off the loan with a low mortgage rate. As we move forward into 2021, more banks may offer lower mortgage rates, tempting buyers to invest.
Yet, with the market’s volatility right now, regardless of if a country has low mortgage rates, people are more considerate of their purchases.
Changing the way houses are bought
Another change that may have happened due to the pandemic is the types of houses people are investing in. In 2019, research showed that the class of people buying most of the listed houses in 2020 were millennials, taking up 38% of home buyers since 2019 in Asia.
One common trait of Millenials is that they tend to be tech-savvy. Almost 95% of home searches are initially started through the Internet. As a digitally-driven era, these Millennial buyers look at different things when buying a home, from focusing on the interior more and whether or not the family is close to school or workplace — as convenience matters.
As such, for the future of real estate investment, more sellers will have to learn to utilize the Internet and focus their marketing efforts online.
A rise in virtual property showings
Even when coronavirus is gone, the habits of staying inside and living in a contactless world will be commonplace. More people will stay indoors due to the convenience and development of e-commerce platforms. While this may initially handicap many real estate businesses, it also serves to bring opportunity.
There is plenty of software out there that facilitates virtual showings of real estate property for buyers. The use of virtual showing devices has tremendously increased during the pandemic. Now more than ever, people prefer to sit in their homes and explore the houses they want to buy online.
These emerging trends seems to be the future of the real estate investment.
With great catastrophes, there is always room for change. That is exactly what the real estate industry must do if it hopes to move forward in the oncoming decade.
\While we’ve seen better times in the Asian real estate market, the present condition is not the worst thing that has happened to the industry. There is hope at the end of the tunnel and as investors learn to adapt to the changes, the industry can come out stronger than ever before.