The ongoing corona virus pandemic has negatively impacted on the world economy bringing all commercial transactions almost to a standstill. One of the sectors drastically affected by the pandemic is the real estate sector. The pandemic has led to massive unemployment globally, business failures, extensive and severe wage cuts and also job uncertainties. The net effect is that there has been a drastic drop in disposable income leading to a sharp decline in demand for houses.
Are home prices dropping or staying put during Covid? Well there seems to be and endless debate on this question. Some economies do not expect prices of homes to drop while others expect a massive decline in home purchases. House prices are affected by the following factors: population, unemployment, economic growth, interest rates and the availability of mortgage. What this means is that house purchases is affected by the state of the economy. If the economy is performing exceptionally well, people can be able to engage in meaningful employment and therefore be able to buy houses. It can be argued that the corona virus pandemic has impacted negatively on the employment sector with many people losing their jobs globally.
In the UK, there has been massive decline with price fall standing at 1.7% as at May making it the largest decline in over a decade according to Nationwide house price index. This is due to the government putting much of the economy on hold. The pandemic has already produced stasis in that in some parts of the country, buying and selling of property has all but stopped. In early April Zoopla reported a 40% drop in enquiries. Prices will tend to drop especially due to massive job loss. It should be noted that house prices may fall in the short and medium term.
Are home prices dropping or staying put during Covid? In the US, house prices are still rising. This is so because some forces in the property sector are at work. Many people continue to engage in gainful employment by working from home. The net effect is that many people are now looking for larger homes in the suburbs that have space for a home office. The demand for homes will not be largely affected with people working from home and earning.
According to ENGEL & VOLKERS, the demand for houses has always been higher than the supply. This is because there has been an increase in the number of single people living alone. According to the firm, corona virus pandemic will reduce the house demand. The demand for houses is due to population growth leading to increase in property prices. The firm however, notes that real estate does not lose its attractiveness. Covid 19 will not affect house prices simply because a home is a stable investment even in times of crises.
Are home prices dropping or staying put during covid? In Australia, the house prices are likely to fall for months with a 4.4% fall expected in all the country’s capital cities over the June quarter and 2.3% in September.
House prices are likely to fall in some economies while remain stable in others. This is because of strict lockdown restrictions bringing the economy to its knees. Working from home ensures people involve themselves in meaningful employment hence being able to purchase houses.