The COVID-19 (SARS-CoV-2 virus) pandemic has had a great impact on almost every industry across the globe, including real estate and home design. A lot in our lives has changed since the pandemic began including the way we shop, socialize, work, and buy homes.
Global mortgage rates remain at all-time lows due to the COVID-19 pandemic and they’ll probably stay low for the next couple of years. That’s great news for homebuyers; it means lower monthly mortgage payments and bigger home buying budgets.
Residential Real Estate
Demand for residential real estate has increased dramatically, especially in countries with residential areas with low COVID-19 infection rates. But that doesn’t mean you must buy a home right now and you don’t want to rush into a purchase based on interest rates alone. Hunting for a new home to purchase in the current environment has both advantages and disadvantages depending on where you are located in the world. Living in a home you love, that makes you feel comfortable and safe is now more important than ever, especially for people who are working from home.
Homebuyers are now thinking about purchasing homes with enough space to accommodate a home office, home schooling their kids, a gym, and larger storage areas. The COVID-19 pandemic has dramatically increased work from home opportunities opening the door for many homebuyers to now have more options to choose where they want to buy a home and live whether it’s in a rural, urban, or suburban location. Health and safety regulations implemented to help reduce the spread of COVID-19 has reduced the inventory of homes for sale in most markets as many homeowners are currently hesitant to put their homes on the market due to the economic uncertainty and health concerns caused by the COVID-19 pandemic. Many potential home sellers are not willing to list or let strangers in to view their home at this time.
The combination of low interest rates, low inventory levels, and financial stimulus have increased mortgage loan applications, increased competition for homes listed on the market and has caused home prices to increase dramatically in most global markets. In the UK for example, the combination of a historically low bank rate by the Bank of England, the introduction of the 5% mortgage deposit scheme for first time buyers, and the stamp duty holiday has increased demand for mortgage borrowing and has fuelled higher home prices. Using the mortgage calculator at Mortgage Calculator UK to estimate the purchase of a home costing £500,000 in London England, with a £175,000 down payment, on a 25 year term, and a borrowing interest rate of 2.00%, your estimated monthly payment would be £1,337.53; a historically low payment for a mortgage of that amount, and your savings from the stamp duty holiday would be £15,000. These incentives will keep the demand for traditional mortgages and mortgage refinancing high for the remainder of the year. The home buying incentives in the UK and other nations in addition to low mortgage interest rates, has created a sellers market and has pushed many low income home buyers out of the market.
Buying a Home
Whether it’s the right time to sell or buy a property right now will depend on your financial situation. If you’re worried about your finances or unsure about your future job security, you may want to consider waiting. Buying a home during the COVID-19 pandemic can present unique difficulties for potential buyers. The better prepared you are, the less there is the possibility you will run into unpredictable problems. Due to Covid-19 pandemic there are fewer homes on the market and house hunting has become more competitive. Expect increased competition and higher home prices.
COVID-19 has changed how we buy and sell homes. More homebuyers are currently viewing and buying homes virtually only with open houses not being allowed and in person viewings being permitted in only exceptional circumstances. If a property viewing is needed, strict public health protocols have to be followed such as surface sanitization, social distancing, using hand sanitizers, only the potential buyer attending the viewing (no kids, friends, or extended family members allowed) and mask wearing. For maximum protection only premium quality 3 layer FDA approved disposable face masks should be used.
COVID-19 has also changed how realtors are listing, promoting and selling homes. More realtors are using technology such as 3D virtual tours to showcase their listings, video communication to meet with sellers, electronic signatures for documents, and closing sales online where the law permits. Realtors more than ever are being relied on to provide correct, detailed, and accurate information about a property to their clients especially in situations where a buyer is only able to view a property virtually before buying.
Home Design
COVID-19 has brought about a transformation in the way we think about home design. Realtors and home designers are adapting to how COVID-19 has changed homebuyer preference for their living spaces and how these requests could be reflected in future home design, home renovations, and home buying choices. Renovations could include permanent home offices with pre-wiring allowing for the installation of professional communication equipment and software for video calls. Working areas will be more focused on how to reduce noise issues and maximize efficiency. Office deigns with a nice background (bookcases, artwork) and suitable lighting for video meetings will be popular. Gardens and terraces will be treated as an extra room for relaxing and doing work comfortably outside.
The way we design, the materials used, and how we furnish spaces will change. Antibacterial materials for hard surface will be used to prevent the spread of contagious viruses. Kitchen storage such as larger pantries will be in demand. Home organization will be highlighted, with de-cluttering, storage addition, and built-in shelving for keeping items organized. COVID-19 has made the minimalist design style which uses multifunctional furniture pieces, multi-purpose spaces, and clean surfaces more popular. Closed concept floor plans, which provide separation and more privacy, are now in demand. COVID-19 has made sustainable design a top priority for homebuyers and homebuilders. Energy efficient sustainable home designs, which reduce energy consumption, are in high demand due to more people working and spending time at home.
Commercial Office Real Estate
Before the start of the pandemic most employers were reluctant to let their employees work from home for extended periods of time except in special circumstances due to productivity concerns. After the start of the pandemic and continuing over a year later most employers who have had to close their offices for an extended period of time have noticed that most of their employees have actually increased productivity while working from home. Employees who enjoy working from home tend to refer to work life balance as a reason for the increased productivity while working from home. Pre-pandemic most employers were of the thought that most of the work completed in an office could not be done efficiently remotely. COVID-19 has shown that most work that is done in an office environment can actually continue remotely if the office is closed, when the employees are provided with the tools (e.g, computer equipment, cell phone, mobile hotspot) and resources (e.g., secure remote access software and video conferencing apps) needed to work from home.
Some companies have already decided to save overhead costs by reducing their physical footprints as their leases came up for renewal or were about to end, opting for smaller and newer activity based flexible office spaces that provide more space for their employees when they are in the office. These trends are resulting in higher vacancy rates for office spaces. Commercial property owners will have to adapt to the new needs of potential tenants. Going forward most business tenants will be looking to occupy eco-friendly modern office spaces in newer or renovated buildings with quality air circulation, and flexible activity based workspaces that have more room for employees to work in and will allow for social distancing when required.
Even as vaccination rates increase worldwide there is still uncertainty about where we are heading with the pandemic due to the rise in COVID-19 variants and the uncertainty of how long immunity from vaccines will last. A residential housing supply shortage is likely to continue in 2021 and into 2022 in most global markets, continuing to put upward pressure on home prices, and increasing competition for homebuyers. Conversely office space vacancies are likely to remain high well into 2021 as the industry adjusts to the demands of the post COVID-19 commercial lease market place. Monetary policy authorities around the world will eventually have to start raising interest rates to keep inflationary pressures under control and to try to slow down the unsustainable appreciation in home pricing in most global real estate markets.
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