The demand for housing will fall by 26%

 Generally, the housing market needs more time to reflect macroeconomic changes. In this sense, 2021 will begin to show the direction that housing will take after the pandemic and the already concluded 2020. The crisis produced by Covid-19 has caused the sector's forecasts to turn completely: after a period of continued growth , has experienced an unexpected fall.

This seems to indicate that the shock will continue during this year, although the effects of this crisis will not be as explosive as those of the previous one. Even so, although the fall in prices is increasingly evident, this will not bring with it an increase in demand. The purchase of a house is closely linked to purchasing power and the possibility of getting into debt, and therefore, to job creation and the health of companies, which has been considerably reduced due to the economic crisis.

Colliers International, a global leader in real estate services and asset management, has just published a study that analyzes the behavior of the Real Estate market over the last year. Within the sector, the experience has been and will be very different in the different locations and product types, but there are two of the modalities that stand out and become the clear winners: rental and new construction. On the contrary, used housing and second homes have had the worst of it.

"The new construction has managed to resist much better reducing to less than half the decline suffered by second-hand housing," the report explains. In the first quarter, new housing transactions (11,286) fell 9.2% compared to the same period of the previous year, compared to 16.9% for used housing. In the second quarter, the new construction market fell by 22.1% compared to the second-hand market, which did so by 50%.

Fall in demand

The firm estimates that in 2021 the demand for home purchases could fall between 20% and 26% compared to the levels of 2019, mainly due to the reduction in used housing sales and a drastic reduction in foreign demand. Buying a new off-plan home allows the buyer to structure his purchase effort in a more appropriate way and to directly access the financing associated with the developer loan. This has been gaining ground to the used one, although the second hand one continues representing 79.5% of the total of the operations. According to the National Institute of Statistics (INE), in September 2020, new construction accounted for 22.2% of sales, increasing 16.97% from the previous year. In the case of the month of October, the last with available data, new housing has monopolized 20.5% of the market, compared to 18.6% in the same month last year. These figures suppose a growth in this type of housing, but they are still very far from those reached during the years of the crisis, when new construction came to represent more than half of all transactions. Too high a level of new construction leads banks to assume too high financial risks and the availability of financing is the most relevant aspect for their creation, along with the availability of land. None of these factors appear to be ever going back to their pre-crisis level. In all likelihood, the price falls will be mainly centered on used housing, due to the lower solvency of the owners and the need to liquidate some of these assets in the face of unemployment and uncertainty. The real estate radiography transmits, for the moment, uncertainty. Much of the information is difficult to process, even in the midst of an international economic recession. This situation leaves little certainty about the long-term future of the housing markets. The pandemic has paralyzed a totally dynamic sector. Although this crisis has nothing to do with the cyclical correction, it could bring some structural change.