Buyers are waiting for real estate values to drop due to the pandemic and they are ready to jump on falling property prices.

The pandemic and border closures have not impeded activity in international real estate markets. 60% of investors and advisors believe that the pandemic is a good time to close transactions and are intensively seeking property investment opportunities.

Over 50% of buyers and sellers expect the consequences of the coronavirus on the economy to lower property prices.

These are the findings of a client survey conducted and presented in an analytical report by international real estate broker Tranio. The purpose of the survey was to identify the expectations of real estate market stakeholders globally during the pandemic.

No panic so far: European real estate still holds the interest of investors.

The 1,192 respondents — both website visitors and Tranio clients — who participated in the survey are investors, advisors, and property sellers who have carefully scrutinised the unfolding market situation and considered transactions chiefly in European markets.

Total number and industry role of survey respondents

Methodology: 1,192 respondents participated in the survey. 1,007 participants are investors, 94 participants are property sellers, and 91 participants are real estate professionals. The respondents that typically include investors from developing countries who consider investment projects in Europe answered the survey questions in different languages available on the website.

The survey found that 61% of investors and nearly the same number of property advisors (60%) are looking for attractive proposals in the market and are ready to make transactions.

The remaining investors and professionals (39% and 40% respectively) are waiting for quarantine measures to end.

Amidst the lockdown and mass self-isolation, half of investors (51%) are willing to consider closing transactions remotely without viewing the property. 49% respondents will not entertain this option.

“In practice, remote transactions are a rarity. As a rule, the buyer has already seen the property in such cases, knows the location well, and buys an ‘understandable’ project, for example a new development. Alternatively, the buyer already has experience with such transactions, as well as the required capabilities, such as a bank account, advisors, and sometimes an overseas business in that country,” says George Kachmazov, managing partner at Tranio.

What will happen to prices?

Most respondents believe that prices will fall during lockdown, but they will bounce back gradually after the pandemic. 57% of investors, 70% of advisors, and 51% of sellers express this certainty.

24% of investors, 16% of advisors, and 17% of sellers share the opinion that after the lockdown is lifted, prices will pursue a long-term downward trend. Nearly one-third of sellers (32%) are confident that lockdown will not impact the prices. 18% of investors, and 14% of advisors agree with this.

“There are two components of price: rent flow, and the multiplier that considers the price at which the rent flow is sold,” explains George Kachmazov, “The multipliers will not change, but some properties will become cheaper due to the fall in rental income.”

Expectations of UHNWI in developing countries

The experts at Tranio also surveyed professional wealth managers that deal with affluent private investors. The respondents were 14 private bankers, wealth managers, and family-office associates in developing countries.

The vast majority of wealthy investors are willing to channel funds into foreign real estate markets during the pandemic, and 86% of experts are actively looking for attractive proposals for their clients. Only 14% are waiting for the lockdown to lift.

Most respondents (79%) who deal with ultra-wealthy clients are also confident that foreign property prices will drop due to the lockdown yet expect them to rebound quickly. Only 7% believe that the price drop will be long-term.

Such investors are cautious when it comes to remote investment strategies. Most respondents (86%) state they will not consider such opportunities for their clients. Only 14% of respondents are willing to discuss property purchase options without being present.

George Kachmazov finds the expectations of investors well-justified. “Properties at a discount, typically bad assets, are going to appear on the market in the coming months. Investors should be ready to act quickly and buy this discounted real estate with cash,” says the expert. He also states that a wave of actual bankruptcies in the real estate market will happen closer to autumn as ineffective and highly leveraged players are exposed by the recession.

“However, the projects that keep steady cash flows pumping — these are supermarkets, residential projects, and senior living facilities — will be sold without a discount now that governments are pouring cheap money into their markets and the base rates set by the ECB and FRS are down,” says George Kachmazov. According to him, conservative investors should look at protection strategies, such as residential real estate. Yet potential maximum returns for more daring investors lie in the most affected market segments, for example hotels, shopping malls and offices.

 

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