Servihabitat forecasts a rapid recovery for the real estate sector in 2021 thanks to the current health and resilience of the market
- It's expected that 2020 will see prices fall by around 5.7%, with new builds being the least affected and the quickest to return to positive growth figures.
- Forecasts predict the sector will accumulate 420,000 transactions by the end of 2020, 26% fewer than last year.
- The rental market is positioned to be the segment least affected by the health crisis, and demand for rental properties is expected to increase in the coming months with a moderate upward price trend.
- Real estate is establishing itself as a safe haven for investors with returns of up to 8%, a figure well above that offered by other products such as the ten-year bond, investment or pension funds, and the Ibex-35.
Barcelona, July 7th, 2020.-The Spanish real estate market is now much healthier and more robust than it was during previous crises, such as the 2008 crash. Having positioned itself as a safe bet for investors, it will be more resilient to the impact of Covid-19 and make a speedy recovery in 2021. This is the main conclusion of a report entitled "The Residential Market & Domestic Investors: The Repercussions of Covid-19," compiled by Servihabitat Trends, the sector's research and analysis platform run by Servihabitat. The document analyzes the current state of the market and the role of the domestic investor in today's climate, focusing on the impact of the health crisis on the sector.
Iheb Nafaa, CEO of Servihabitat, says that since the de-escalation began, "we've seen signs of a faster recovery than one might have expected after the shock of recent months. The residential, rental, and logistics markets are likely to be the least affected and quickest to recover typical ratios. However, the length of this recovery will vary according to the area and product type." Juan Carlos Álvarez, Asset Management Business Executive Manager of Servihabitat, believes the uncertainty caused by the health crisis has helped the sector "to consolidate its position as a refuge for investors" and that its stability "is key to attracting investors looking for good low-risk returns."
House prices will fall by 5.7% in 2020 and 3.3% in 2021
Despite a much healthier market, more resilient companies, and long-term sustainable growth plans, prices will feel the effects of the crisis for the next two years. Taking into account the 3.2% growth of the first quarter, the forecast is for house prices to show a 5.7% decrease by the end of the year and begin a gradual recovery in 2021 to reach -3.3%.
New builds, which have the least availability in the market, will not see their prices fall as much as resales and will begin to recover earlier.
2020 will produce a total of 420,000 sales transactions, 26% fewer than last year
Sales will be the indicator most affected by the health crisis. After three months of almost no activity due to the state of alert, Servihabitat predicts the year-end will see a total of 420,000 transactions, a drop of 26% on the 2019 figure. The figure is expected to recover in 2021, reaching 503,000 operations. However, the monthly results for 2020, with the exception of those affected by the state of alert, have maintained a healthy rate, similar to that of 2017.
Servihabitat's Network of partner agents (APIs) confirm the recent downward trend for this indicator. Even so, the results of the survey carried out among the APIs in June, suggests the majority expect to see improvements over the next six months, primarily as a result of the reinstatement of purchases previously halted by the administrative difficulties of recent months.
New project startups will drop by 20%, while the number completed will decrease by 12%
Servihabitat calculates that, in 2020, both the number of new builds commenced and the number completed will slow down compared to 2019, a year that already registered a smaller percentage increase than 2017 and 2018.
In 2020, it's expected that the number of new projects will fall by 20% to 86,000. By contrast, because work has been able to continue after the state of alert, the number of builds completed will decrease by only 12%, with some 62,000 projects being finished. Next year will see similar numbers, with almost 85,000 homes started, and some 75,000 projects completed.
There has been a definite change in the type of property most in-demand from buyers. The lockdown has resulted in more than 40% of buyers requesting larger homes with terraces, gardens, and balconies. This data is backed-up by more than 80% of Servihabitat's partner agents (APIs), who confirm their clients are looking for homes with outside space. With regard to location, the peripheral areas of cities are most in-demand, accounting for 35% of buyers, while city center locations continue to be the preferred option for 27% of buyers.
The rental market is the least affected part of the sector
The current climate has allowed the rental market to consolidate its position as one of the most requested housing options: 24.1% of Spanish households live in a rented property, and, in the coming months, we expect to see that number increase. The data extracted from surveys carried out among Servihabitat's partner agents (APIs) in March and June agrees. In just three months, the number of them who think they'll close more operations in this market segment has almost doubled. This increase can be attributed to the current economic uncertainty, which may delay a potential buyer's decision to purchase until there is more clarity on what the future holds.
The price is trending towards moderation, with a slight 3.6% increase in March 2020. And more than 49% of the APIs consulted expect this upward tendency to be sustained. Although we do expect to see an increase in the supply of rental housing stock due to an influx of homes initially intended for vacation use, we don't expect this to have a notable effect on rental prices.
Even so, Servihabitat's partner agents (APIs) also believe that, on average, it will take longer to find tenants (going from the 45 days reported by the March survey to 52 in June). This is because tenants will be looking for the best price and new features, such as homes with a terrace or garden.
Investor interest in real estate is growing
The public health crisis has generated an uncertain economic outlook that has rapidly spread to any financial investment related to stock market values. Real estate, on the other hand, is viewed as a safe-haven asset by investors. Currently, real estate products offer more stability, and their rental profitability and capital appreciation provide an 8% yield, which is well above that offered by other securities such as the ten-year bond, investment funds, pension funds, or the Ibex-35.
The current situation has changed the investor profile. While in the first quarter of 2020, the majority of investment operations were carried out by corporate investors, today, and according to data from Servihabitat's Network of partner agents (APIs), 70% of transactions are being driven by retail investors. Price adjustments and growing demand in the rental market mean that this investor profile views real estate as a stable project and an attractive financial opportunity. According to data from the more than 750 APIs surveyed, 87% of operations are worth less than €200,000.
The market's main pace-setting indicators will undoubtedly suffer adjustments, but it's expected they'll begin to recover next year. In the meantime, we must pay close attention to the evolution of the health crisis and the range of variables that could affect it.
Access all the data on the post-coronavirus evolution of the residential market and the investor profile:
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