While various industries across the globe come to a halt amid the recent coronavirus outbreak, the world of luxury real estate goes on. Impacts can start to be felt in luxury real estate, with sevarities varying from region to region. Real estate markets worldwide attempt to anticipate and brace for glooming economic impacts of the ongoing pandemic on the industry. And agents look to adapt to changing client behavior and government regulations. In these uncertain times it is hard to say what the future impacts of the coronavirus will bring on the world of luxury real estate, but rest assured market analysts are watching closely to keep us informed.
As impacts of the growing coronavirus pandemic begin to grow throughout various regions, it is apparent that buyer and seller behaviors have had to make a sudden adjustment to the way they do business amid coronavirus uncertainties. According to a report by the National Association of Realtors, 25% of sellers nationwide had already made changes to their ‘terms of engagement’ by early March because of the virus. Now, up to 60% of sellers have included precautions such as mandatory wash stations, removal of footwear, and complete cancellations of open house showings all together, says the study. By march 19, another NAR survey showed that…with 16% of sellers actually taking steps to stop marketing their homes. In fact, a recent report by Compass Bay Area has shown that hundreds of listings have now been taken off market throughout the San Francisco Bay Area over the last month.
For many areas it seems inevitable to avoid a ‘short term slump’. With a general slow in buying activity, Fitch Ratings warns of a possible decline in housing prices in its latest housing market report. “The shrinking foot traffic will result in a sharp decline in home sales for at least the next two to three months. Fewer home sales and fewer buyers will put downward pressure on prices, although the impact will not be even across geographies”. Fitch also states that the cities appearing the most vulnerable to pricing declines are those considered to have overpriced housing markets, such as various counties throughout Texas, Florida, Washington, and California.
One of America’s harder hit markets, New York, is finding itself exceptionally challenged by the presence of the coronavirus with previously increased mansion tax and existing oversupply issues, claims Jonathan Miller, president and CEO of Miller Samuel. Residential real estate showings have now also been restricted due to social distancing measures put in place by the state. Despite low interest rates and a rebounding stock market, Manhattan registered only two high-end home sales last week, a record low since the market collapse of 2009, says Donna Olshan, of Olshan Realty. However, interest for luxury rental properties has peaked in the Philadelphia suburbs, offering more in terms of large interiors and outdoor spaces then the city.
As several other states are also on lockdown such as California, Washington, Colorado and Illinois, similar scenarios are starting to unfold across america. According to Compass analyst Patrick Carlisle, San Francisco’s Bay Area luxury homes market has been hit particularly hard with over 900 listings removed within the week of March 16-23rd alone. Furthermore, Los Angeles topped the list of cities with a high risk of “coronavirus-recession”, as calculated by Redfin. Similarly, luxury housing markets across Dallas and Austin Texas could also be among the more affected.
Mansion Global suggests that these could be the early signs of a market slowdown. While million dollar sales rose 11.4% across america in the fourth quarter, market gains are predicted to be undone by the rippling coronavirus effects, says a recent Realtor.com report. “The pandemic and virus-fighting measures appear to be disrupting that initial momentum as both buyers and sellers adopt a more cautious posture.” says Danielle Hale, chief economist at Realtor.com. Realtor.com also noted a decline in new listings across America of 34% for the last week of March, year-over-year.
Some real estate markets seem to be less vulnerable and better situated to handle the uncertain effects of the coronavirus. Canada’s top luxury real estate markets appeared to be up through January and February, states Sotheby’s International Realty Canada. Their 2020 Top-Tier Real Estate Spring Outlook outlines, “A shortage of conventional and luxury property listings, compounded by surging consumer demand, incited multiple offers and price escalation across three of Canada’s key metropolitan top-tier markets in the initial months of the year”. Likewise, Australia’s luxury markets in Melbourne and Sydney have seen the annual increase in housing prices crossing double digits, giving them an upperhand.
Asia Buyer Demand
As Chinese buyers make up 11% of international real estate investment throughout the U.S., according to the National Association of Realtors, it is crucial to take in account their current economy. With current travel restrictions, realtors are noting postponed client visits from overseas until after the summer, delaying final closings and tours until further notice. However, a survey by Juwai.com on shows that Chinese buyer enquiry in certain countries had in fact increased over the last 6 months from Feb 2020, despite the coronavirus outbreak. Some theorize that because China had been dealing with the outbreak much before North America, international buyers may return to the market sooner, said Rory Golod, New York regional president of Compass real estate brokerage.
It seems Asia buyer demand is far from a stand still with the help of innovative digital services. Chinese builder Modern Land generated 600 contracts in five locations by live streaming a sales pitch to prospective buyers in one day, according to South China Morning Post. Another study by SupChina states there were roughly 350,000 virtual tours per day in February, over 35% more than this time last year.
To Sum It Up
Now is a crucial time to advance digital marketing practices if you haven’t already. As social distancing requirements and industry closures begin to burden in-person real estate practices, many realtors quickly work towards adapting and focusing on digital services over the last month. Virtual tours, innovative websites, and buzzing social media platforms have become crucial to sellers at this time as buyers inquire about properties from afar. Some real estate agents are even going as far as holding “virtual open houses” on various platforms, says Eddie Shapiro, CEO of Nest Seekers International.
While it is unclear how long social distancing measures will be in place, it seems the recent effects of the global coronavirus pandemic will eventually come to an end, though it appears too early to know when this could be. Some expect the luxury real estate markets to rebound by the fall, others even suspect a surge in sales. One thing is certain, that only time will tell.