Residential Real Estate
The residential real estate market remains uncertain, particularly in metropolises, as the pandemic has spurred on a work from home trend, which has led to city dwellers seeking more space and greenery outside the capital.
In the UK more people are moving out of big cities to smaller towns or more rural areas, in search of bigger houses, home offices, gardens, and greener surroundings. The home-working revolution is expected to continue in the post-pandemic era, bearing in mind that employees are saving on commuting costs and smaller offices also mean reduced spending on office accommodation for businesses.
Moreover, the work from home revolution sits well with the elites’ plan to reduce human carbon footprint.
Residential real estate is likely to be impacted by this move out of large cities to smaller towns or more rural areas
In Paris, this macro trend in the residential real estate market is also underway.
Covid-19 health crisis prompted city dwellers to seek more space and greenery outside the French capital. Real estate prices in Paris’ banlieues (suburbs) spiked in 2020 in response to growing demand from property hunters looking to settle outside of the capital, according to new data collected by Meilleurs Agents, a French company specializing in analyzing property prices in France.
“The tendency continues and is a contrast to the drop in prices in Paris over the last twelve months” Thomas Lefebvre, the scientific director at Meilleurs Agents, told Le Parisien on Monday.
But it is not just Paris that is experiencing falling prices so too are luxury residential real estate in New York, Manhattan.
Manhattan’s luxury condo frenzy fizzled out a few years ago and today owners are taking realized losses as they offload properties at steep losses
A prime example of this is the pending deal at 551 W. 21st St., where two units listed for a combined $26 million found a buyer after a couple of years on and off the market, according to Bloomberg, who cited data from brokerage Olshan Realty. The owner initially acquired the property in 2016 for $31.3 million and then attempted to flip it for $40 million the following year. With no success, the owner is expected to realize a 17% loss on the properties once the transaction is completed.
Moreover, in the UK its December 2020 index, ONS data revealed that the lowest annual growth across the country was in the capital, where average prices increased by 3.5% over the year to December 2020, but was down from 7% in November 2020.
2021 is likely to see price declines in the residential real estate market with metropolises being the worse impacted
If the labor market conditions weaken as most analysts expect, the housing market will likely slow even further in the months ahead.
But the bright lights of the city do have a pull, particularly amongst the youth.
So, a residential real estate bear market could also offer investors rental bargains, but all this needs to be weighed up against a changing political and labor market.