Impact of the Prolonged Pandemic on residential real estate buyers
Those in rental homes, some of whommeted with discriminatory behaviourthrough the lockdown,have had to live through immense insecurity and began thinking about buying. Those living in their own homes, which transformed into makeshift offices and classrooms for the children,were led to consider larger spaces given how much time they spent in their homes with the entire family. Most companies too, are allowing some form of hybrid work from home for their employees,heightening the need for a space to work comfortably from home.
With the first wave of the pandemic, the fear around job security led to consumers delaying their home buying decision. The second wave brought with it fear for their safety and lives.The return to normalcy now, however, is fuelling the need for housing to be converted to demand.
Additionally, because the COVID 19 crisis exacerbated the industry’s challenges over the last few years, the number of new projects has gone down substantially.As a result, inventory for sale has come down substantially. Developers are exercising caution, and the result for the customer is that from a situation of abundant choices, homebuyers today have far less to choose from. This is also contributing to people accelerating their decision to purchase their homes.
Affordability has impacted positively based on prices coming down over the last five years and homebuyers getting salary increments over the same period.Compounding the increase in affordability is the reduction in mortgage rates, andwe are now at historical lows for mortgage rates. This reduction in interest rates multiplies the rise in affordability, making it an extremely favourable situation for those considering a home purchase.
A look at the supply side is pertinent. Early on in the pandemic, there was talk of a K-shaped recovery - certain developers will be able to take advantage of the adverse situation and grow aggressively while others will be pushed down as a result of the pandemic. This is definitely what is happening on the ground – reputed developers with a track record and a differentiated product and a brand known for delivery continue to be able to see strong sales. The strong sales lead to rapid construction on the site, which further adds confidence in the market for the brand. Unfortunately, those at the opposite end of the spectrum find sales challenging and consequently, the construction pace is slow,which affects future sales.
It is the developers at the far end of the spectrum thatare struggling, that the homebuyer will need to be wary of. Homebuyers mustn’t get carried away by unrealistic sounding offersor prices in the market. With COVID 19 compounding the financial burden on developers, there is very little room for prices to slash. Buyers must check the developer’s track record, the current financial position, financial closure on the project and the actual work happening on the site to make an informed decision.
All in all, while this is a great time to buy a home, homebuyers must do their due diligence and make sure that they buy from reputeddevelopers where there is a relatively low risk to their investment.