The impact of Covid-19 on the real estate industry

Real estate has, over the years, been one of the most lucrative businesses in the global market. The demand and supply aspect of real estate is affected by world issues. Recently, the global Covid-19 pandemic has greatly affected it and has seen it crumble to uncertainties that no one forecasted for. It took real estate by surprise, and both big and small players in it are feeling the severe effects of the pandemic. The Financial Crisis of 2008 was the worst economic disaster after the Great Depression of 1929 and also had a great impact on world economies especially in the real estate sector

All players in real estate have felt the effect of Covid-19. The impacts include the following:

Reduced construction activities

Compared to the past, construction has significantly reduced. People are reserving their cash use due to the uncertainties ahead. Developers are thus not engaged as before because those who are willing to spend on construction activities are few. The cost of construction has also risen because raw materials are scarce. Operations by manufactures of construction materials are also closed, and thus those who are willing even to get engaged are not on luck too. New properties are not being developed, which is greatly affecting the supply aspect of real estate. The worst thing about all this is that despite there being few listings because no new properties are being unleashed, those willing to buy are also few which would have enticed construction activities to balance the equation.

Fear by lenders

Real estate requires lots of capital which a part of it can be borrowed or ROI. Lenders are sceptic about issuing loans to real estate investors at this global crisis due to the feasible uncertainties. Borrowing at this time is not a risk financial institutions are willing to bet on because of the crash world economies are facing. Payback would be risky because businesses are not booming due to lockdowns and thus assurance of getting their money back with interest is low.

Low sales

Sales in real estate have reduced due to lockdowns, and people not being willing to invest at the moment. Movement and relocation from one place to another has been affected and thus making real estate sales low because people are stuck to where they were before the pandemic. There has also been a loss of jobs which makes the future uncertain for families who had dreams of buying and leasing houses to better places. The curve on sales on listings on real estate properties has dropped, and investors are facing losses.

Bargain on leases and rents

The cost of living has undoubtedly increased and thus has seen renegotiations on the prices of leases and rents from tenants to property owners. Despite it being a painful decision because of the high cost of putting up properties and buying them, owners and investors have been forced into a bargain by a few of them who are willing to understand their tenants. Some are still charging the same due to issues such as loan repayment and has become tough for those leasing and renting. Bargains accepted have seen tenants and those leasing get lower rates that they can afford which was not an idea investors had forecasted or budgeted.