Impact of Covid 19 on Real Estate

The COVID-19 pandemic is currently a truly global phenomenon with more than 2 million people (a third of the world's population) staying home or trying to do so if their way of life allows them to. The short-term human and economic impact has been undeniable, as people who can stay at home to work have closed their offices, shops and production stalls have also been closed.

The level of economic uncertainty, it can be said that it is at its highest point with the trajectory of the recovery difficult to forecast , and although at the global level there has not been a joint response, individual countries are taking the necessary measures to cope these complicated times.

Before the virus shook the world, the real estate sector in Mexico was expected to grow 4% during 2020 ; however, this forecast will be delayed until the end of the year or even until the beginning of 2021.

In the real estate sector, we can see that the contingency is accelerating some trends, while others may eventually reverse. At the digital level, the search for properties has decreased by 40% in the most important portals around the world , however in Mexico the drop has only been 22% from January to March and in April we are seeing that it begins to stabilize.

Digital portals have become the main sales channel , as well as the first point of contact when a person is looking for a property for sale or rent and although for the moment the purchase decision is being postponed, it is important to highlight that is stopping.

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Although the number of searches has decreased, those who carry them out are willing to continue with the process. The total of people who are looking for a property, and who have followed up with advertisers , increased 19.2% in January, 18.2% in February, 16% in March and 17% in the first two weeks of April.

Regarding housing rentals, the information that circulates is that approximately two out of every five contract renewals have been cancelled, due to lack of work . The Secretary of Labor registered the loss of approximately 350,000 jobs since the middle of March, and as the pandemic evolves, there is a risk of more layoffs.

The office rental market in Mexico is also beginning to face a bleak outlook with an increase in the vacancy rate that could reach up to 17%.

Cowering offices are bearing the brunt of many companies moving their staff to work from home, and corporate building construction will face a contraction for at least the next few months until the global economy stabilizes.

In addition, retail and shopping centers have also been forced to close, and their recovery will surely be slow and long-term since, in addition to the contingency they face new sales models such as electronic commerce, this is one of the trends that accelerated during the contingency.

In these times of uncertainty, it is important to note that although the volume of transactions has decreased, the sale and rental of properties have not stopped; the real estate sector is changing the way of doing business but not its substance and digital tools are the best options to continue moving the market, which from past experiences, we know that once this situation is over its recovery will be intense.

Factors such as the maintenance of interest rates and the terms accessible for financing by banking institutions during the contingency because it is predicted that these could increase once the situation has normalized and that the authorities have announced economic plans to revitalize the construction sector, they give certainty that the market is not going to stop.