As the COVID-19 pandemic enters its first year of wreaking havoc on people’s lives, its far-reaching impacts on many industries are pretty much felt to this day. Globally, healthcare systems still feel the brunt of the crisis as cases continue to rise even as several COVID-19 vaccines are being rolled out. Local and national economies and numerous industries around the world also feel the brunt of the pandemic’s effects, which is why key players and decision-makers are always looking for ways to address problems as they arise.
Among the industries that continue to face different challenges in light of the crisis is the real estate industry. Despite being somehow among the very few resilient industries that maintained its steady performance throughout the crisis, the real estate industry nonetheless has a few problems just like many others. Fortunately, such challenges also come with certain opportunities that serve as the equilibrium that prevents the industry from sinking.
Here are the top opportunities and challenges for the real estate industry this 2021:
Remote work and distance learning setups would continue to drive demand for properties
Even as vaccines are already being administered to the public, a lot of companies and learning institutions still go for remote work and distance learning arrangements. This would, in turn, sustain the demand for inexpensive properties whether in suburban or rural areas where one can easily find affordable land for sale and then construct a home with the help of local real estate developers and builders.
This trend actually began in 2020 following the strict lockdown orders that forced companies and schools to switch to remote ways of continuing their normal operations. Fast forward to 2021 and many jurisdictions still have the same situation, which explains why there is a shortage of available properties in certain areas relative to the high demand. As such, one can expect to see a sustained high level of real estate activities in areas with high demands.
Border closures could negatively affect real estate sales and investment opportunities
The unpredictability of interstate border closures creates an air of uncertainty among potential homebuyers and real estate investors, both of which can hurt the entire industry.
It’s important to note that the law of supply and demand pretty much applies to the real estate industry. This is why it’s only logical to expect that the uncertainty caused by border closures could bring down demand for properties, as well as the market potential of properties within the different states.
If borders will continue to be closed almost overnight, then the real estate industry could suffer a big blow in terms of revenue generation.
Properties in CBD areas could be problematic
The various properties in central business district (CBD) areas may be highly coveted before the pandemic, but they are now among the most threatened property types in terms of desirability. This is because many potential homebuyers tend to favor properties in suburban and even rural locations since they are perceived to be safer and more conducive for online learning and remote work.
With that in mind, it’s vital to realize that if the trend of requiring workers to work at home and of learners to engage in remote classes would last for the rest of 2021 or beyond, then it’s not impossible to predict that CBD properties will be problematic.
Between a high-priced CBD property where COVID-19 cases are high and one in a remote area where cases are low and homes are affordable, it’s easy to see which one most homebuyers would pick.
Asset valuation will be a trickier business
Determining how much a property costs from a fair value point of view rests on several factors such as comparable market shares and future rental cash inflow or capital expenditure requirement. Before the pandemic, property valuation is already a tricky affair; enter the pandemic and it just becomes twice as tricky.
The volatility of the current situation makes asset valuation pretty much similar to a tightrope walk: one wrong move and a catastrophic fall to the ground is inevitable. Quality assets, for their part, are less volatile than secondary assets, which are at a greater disadvantage in terms of reliable fair market valuation. As such, it’s important for industry players who are dealing with secondary assets to be diligent in their jobs to come up with valuations that are fair in the real sense of the word.
With these challenges and opportunities, real estate industry players should have a solid guide on how they could tackle their business throughout the year.
