The world we know was turned inside out with the confinement forced by the new coronavirus. We believe that there are habits that are here to stay and that we will see a paradigm shift with an impact on the real estate market. Families moving out of cities to the periphery, smaller offices and in the center of cities (or almost virtual), greater interest in holiday homes and villas, strengthening the importance of the house, conversion of local accommodation to housing.
It is these trends that we will seek to explore in this article.
Remote work is here to stay
The pandemic has fostered the widespread and large-scale adoption of telecommuting. Companies have realized that employees can be more productive working from home, because they save time in transport and long lunches, meetings are faster, and there are fewer interruptions (very typical in open spaces). Those who have small and/or school-age children end up having more work and being more strenuous, but in a future situation of normality of daily life, children return to day care centers and schools, and working from home can have immense benefits, for both workers and companies.
Let’s take a look at some of the trends we expect to see in the near future:
Paradigm shift in sight?
We could be witnessing a complete change in the paradigm prevailing until a few months ago, which pointed to a massive concentration in cities, with young people looking for the central areas for the dynamics and scope of the offer of events, from yoga and meditation in the park, trendy restaurants and shops, concerts, the vibrant multicultural context due to tourism, etc… Being in the center meant being close to the epicenter of events, where everything happens, where everyone is. This led many companies to have to open offices in the center, and to give priority again to the center of Lisbon compared to other centralities of the 1990s and early 20th century, as is the case of TagusPark in Oeiras, which ended up losing its former attractiveness (of course is an opinion, debatable).
The volume of online purchases in Portugal until the end of 2019 was relatively low when compared to the Nordic and Anglo-Saxon countries. Recently, we were witnessing an explosion of meal delivery through digital platforms such as UberEats and Glovo, but, for example, online shopping in supermarkets still registered relatively low levels of adherence (mostly because of those who are unable to offer services immediate). Not to mention shopping for clothes, electronics and others. The pandemic changed all this very quickly, catching supermarkets off guard to the point of having delivery times of more than 1 month. In the US and UK, for some time now, a large number of physical stores have been closed and they have started to favor the online channel. This makes retail spaces less desirable, and on the other hand, logistics operations gain greater importance.
It will be interesting, going forward, to observe the behavior of the student accommodation market. The offer of online training has been increasing considerably over the last few years (and now it has exploded), and even fully online MBAs are starting to appear. Even if part of the courses can work in blended mode (in person and distance), the offer of online will increasingly gain more expression. This does not necessarily mean that fewer young people can come to study face-to-face at universities, as the social interaction component is particularly important at this stage of their lives. However, it is possible that there will be some behavioral changes with a direct impact on real estate.
For all that has been said, we hope to observe:
Expected price evolution
Regarding prices, it should be remembered that real estate is a type of asset with little liquid, which reacts more slowly to economic shocks, and as such, although a correction is expected, especially in terms of capital appreciation, it is still too early to understand what will be the magnitude. In our opinion, the areas with the greatest potential impact will be the most central and most exposed to tourism and local accommodation (eg Santa Maria Maior and Misericórdia).
With the foreseeable shift from a seller’s market to a buyer’s market, the times when homes sold in 2 to 3 months are ending, and take-up times are expected to increase beyond 6 months. This was a trend that had already been observed before the pandemic, and we already expected the market to enter a more rational cycle of appreciation, as we indicated in our last Lisbon Real Estate Market Snapshot 2019. It was clear that we were in the final phase of the growth cycle, which was already being noticed in other more mature international markets. In any case, Portugal and Lisbon benefited greatly from a national and international environment that exceptionally favored real estate (and which we believe will continue to benefit in the long term).
Recommendations for those considering selling
We hope this article has been helpful to you. If you want to exchange some impressions, call us on +351 960 236 626 or e-mail: [email protected].