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Christie's International Real Estate


9 April 2020


The Coronavirus crisis and the resulting lockdown has naturally impacted on the real estate market which, like so many other industries, is as 2021 begins almost at a standstill. What is the current situation and, above all, what could the short, medium and long-term reserve?

While it is impossible to imagine with any certainty how long this unprecedented situation will last, certain trends are emerging. Our analysis of the real estate market today and in the future...

The real estate market strongly impacted

Unquestionably almost all sectors of industry have suffered, but the facts for real estate are clear. Like all non-vital activities in the country, real estate in France has undergone an extremely significant slowdown. In reality, although solutions exist to maintain customer service and guarantee a minimum service, the industry is virtually at a standstill.

Real estate on hold

2019 was a record year with more than one million transactions recorded, and 2020 was shaping up to rival or even better it. And then, from nowhere, Coronavirus reared its ugly head ... and as a result almost the entire sector is at a near standstill.

The vast majority of construction projects were halted (it is estimated that 95% of work on collective housing was suspended at the beginning of April). Real estate agencies have been closed for many weeks. Moving house? Those considered to be urgent moves have been allowed to go ahead, but the vast majority have been postponed. And until further notice, bank loans are also on hold...Stark facts that can’t be ignored or tempered.

With lockdown, visits to available assets on the market became impossible. Of course, real estate agencies remain available most of the time to answer their clients' questions, and virtual tours of properties available on the market are possible ... These however in the vast majority do not lead to a sale for buyers today are understandably not prepared to buy a property on the sole basis of photos or videos.

As for the banks, as aforementioned, it is currently impossible to take out a loan. Pre-lockdown requests are currently on hold. And some buyers who had obtained an agreement from their bank have seen their dossier reassessed or simply cancelled.

Despite all this, a (minimal) activity continues

Sales projects that were well underway when lockdown was announced have not all been postponed to a later and undefined date. Working remotely, notaries try their best to finalize sales and although this is obviously more complicated it is not impossible. Thanks to email, sellers and buyers can receive relevant documents for signatures, which are of course verified at each stage by the notary.

Some notary offices allowed clients to sign sales agreements by means of power of attorney for projects that were less advanced at the onset of the crisis.

The majority of real estate agencies have remained active since the start of the crisis with team members working from home. One positive aspect is that with less pressure they benefit from more time to work out with their vendors the ideal marketing strategy to put in place once the crisis is over.

Thanks to videoconferences estimates of apartments or houses to be marketed are also possible, although these will no doubt require tweaking once a physical visit is allowed. They nonetheless offer a realistic starting point for a project and are significantly more reliable than online valuations.

Potential buyers can naturally continue to browse real estate ads both on specialized sites or agency sites, and virtual tours can help to get a more precise idea of properties worth following up. Things get more complicated as the project progresses, although some brokers can study dossiers at a distance... But with banks currently at a standstill regarding loans, it is impossible to go any further as things stand.

Real estate and Coronavirus: what does the market have in store?

Faced with a totally unprecedented situation, it is essential to accept that nothing is set in stone. Although far too many grey areas remain to predict how - and when - the crisis will end, two scenarios now seem to stand out.

Case 1: A relatively short-term epidemic

Here we touch upon the most important factor when attempting to assess the gravity of the situation and its impact on the real estate market: when will things get back to normal?

If the crisis is resolved in the coming weeks or months, that is, before this summer, the consequences should remain relatively limited. All of the measures announced by the government, including the tens of billions that have been pledged, should suffice.

Interest rates, it would seem, should stay low. This would be essential in order to revive the economy, and the 750 billion euro of public debt buybacks announced by the European Central Bank in its emergency plan to limit the economic effects of the virus should follow suit.

With low interest rates, all potential buyers would still be encouraged to make a move.

Some other factors would also appear to allow a relative optimism. Looking back, the 2007 subprime crisis led to the freezing of loans, significantly impacting the number of potential buyers. This should not be the case this time around.

In particularly sought-after areas such as the capital, there will always be numerous potential buyers for a single seller. Under these conditions, it would seem highly unlikely that a significant drop in prices shall ensue.

Finally, in this period of uncertainty, the stock market is once again in a flutter and investing in stone, more than ever, appears to be a safe haven.

Case 2: A very long-term health crisis 

Although this is by no means the scenario envisaged today, it can’t be ruled out entirely. So what would happen if the health crisis were to last, or if the virus were to reappear soon after being supposedly eradicated?

Should this happen, the economic crisis would then be lasting, with millions of jobs threatened and numerous businesses shutting up shop. The very structure of the country’s economy would be destabilised.

It is difficult, in such an extreme case, to predict what precisely would happen to the real estate market and to what extent. But one thing is certain, a long-lasting decline would be on the cards.

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