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Real Estate 2020: An April Fool's joke?

  • Vasilis Asteriadis | 01/04/2020 | 5 minutes
Real Estate 2020 April Fool's joke;

As the global economy underfunctions and this has affected the real estate market, I read and hear various opinions about the next day. I hear about reductions in real estate values ​​ although there is not a professional analysis which proves that point.  

But let's try to capture the data with realism and always with a note of optimism.

We are not talking about an economic crisis but about an external factor that can of course cause a reshuffle in economic life. It is not just about one state or one currency, it is almost a global problem and of course we do NOT know when our life will return to our daily routine.

Let's look at the Greek real estate market. There is no doubt that at some point this situation will recover (of course, we all wish it to be done as soon as possible and with the least human losses). However, the restart of the economy will not be reminiscent of the day after the collapse of Lehman Brothers or 2015 after the referendum and capital controls, but will be a return to normalcy, perhaps with strong consumption behavior due to quarantine (there will probably be an increase, even temporarily, in outflows / coffees / drinks etc).

Certainly some professions are affected more than others and we all wish that the tourist season will not be lost, so I believe there should be a coordinated effort to extend its duration and have tourists until October / November (if the weather allows this).

The question of course is how much will this affect real estate values, rentals and sales?

Let's go a little further back. 2019 was a good year, according to the data, in the real estate market but 2020 had started with low rates. The key features of 2020 were: very high rents that consumers were NOT willing to pay and so we had no rentals, the asking prices (mostly for apartments) were too high, the landlords were waiting either Golden Visa buyers to pay for the property or receive higher rental value (2 or even 5 times higher than the normal) from Air BnB and commercial properties like offices were waiting for a tenant.

I believe that many landlords who have had their property for short-term rental, who had not organized it in a professional way, will turn to the traditional long-term rental (3 years) in order to have a more secure income (after experiencing the absolute reduction due to the current situation). Retail stores will invest more in online shopping , so they will search for  smaller stores and the demand for offices will decrease because the previous year remote work was established.

In my opinion, these will NOT be the results of Corona Virus but a correction of the “wrong” way real estate market used to work.

Also even the real estate business will change and will have to take advantage of technology as the Greek public will be even more familiar with the ability to initially see a property with video before visiting it.

Another thing that I think will change is the trend for smaller homes that was observed during the crisis. Many families were looking for a home with the needed, for each family, number of bedrooms but with the least square meters as the wanted to pay as cheaper as possible.  However, staying inside the homes, due to quarantine,  may lead to a revision of this trend and  probably people will start to look for that extra utility room or living room.

Now regarding real estate investments and of course I am not referring to organized funds, but to individual investors, it should be understood that any real estate purchase is an investment and contains risk. At the rate at which the economy is galloping the risk is much higher than we think, there is NO safe investment (and if there was it would have zero or negative return) so if a property is commercial or in a good location (Location Location Location) It does NOT mean that it is the right investment for anyone.

Prior to any decision, the potential investor must have prepared his Investment - financial - plan known as Financial Planning. In this way he will have knowledge about his risks, his investment opportunities, the division of the investment into cash and intangible and immovable investments. This must be done even if it is a purchase for his own use.

This way will he be able to know what real estate investment he is looking for and with what specifications. He will be able to have discipline in the economic outpout he is waiting for and based on the plan that he have scheduled, will be easier to achieve it.

In conclusion, I do not think we will see frightening changes in the Greek real estate market but I hope we will see changes in our investment mentality.

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