The coronavirus moves the real estate market! Here is how real estates will be affected!

Interest in real estate increased significantly at the end of last year. In December, the CNB also contributed to this development with its positive vision of 2020, which predicted a slow yet continuously stable development over the next two years. "The market was quick to react and sales took off dramatically. This trend continued at the beginning of 2020, and even when the first cases of the coronavirus appeared in the Czech Republic, the stream of inquiries from clients interested in buying or renting a property remained steady," says Elena Jakubovič, founder of Y&T Luxury Property.

In the following interview, Elena Jakubovič comments on current events and describes how the situation in the real estate market will evolve.

How will the spread of the coronavirus affect the real estate market?

It has been several weeks since the first case of the coronavirus appeared in the Czech Republic, and now that the numbers of infected people are rising, it is clear that this will affect all spheres of our lives. By now, the impact of the epidemic on real estate demand is already visible. People are worried about their health and they are waiting for what happens next.

How did clients respond to the incidence of the coronavirus in the Czech Republic?

The first signal was a client, who had asked us a month ago, if we could add a clause in the brokerage contract stipulating that in the event of the spread of the coronavirus, he postpone the starting date of cooperation on the sale of his property until the situation stabilizes. We added the clause to the contract, but we did not believe that this situation could occur.

How can coronavirus move the prices? What are you expecting?

The coronavirus has already moved the prices. Since the beginning of this week, real estate prices have started to fall. We have been contacted by both private owners and companies. The decline for this week is insignificant, not worth mentioning with regard to sales.  In case of companies, which own hundreds of apartments for rent, there is a slight decrease by 15 to 20%. The so-called Airbnb apartments have had a huge price drop of about 50%. For example: an apartment in the Old Town, which was being offered for long-term rent for twenty-five thousand before the pandemic, has now dropped to fifteen and a half thousand (which is an almost 62% drop in rent!).

In addition to prices, the coronavirus also affected the number of properties offered. With regard to rent, the number of properties on offer has risen by 16% since the beginning of March.

Over the coming months, I expect a slight fall in prices, especially in middle-class real estate. Moreover, the transactions transactions interrupted by the pandemic will be concluded, as there ill always be a demand for quality real estate. And if someone decided to buy an interesting apartment or house, they will not want to lose it.

However, the exact development will depend on how long the quarantine will last and whether interest rates will continue to fall.

Is it time to panic? Do you expect people to change their behavior due to coronavirus and start selling or buying properties quickly?

The panic has already begun. Airbnb apartment owners were the first to feel it, having experienced a rapid decline in demand. This segment was a big hit a few years ago, but has been struggling with obstruction for some time. People usually tried to rent their own housing for a short time, then they bought another apartment and pledged their own or their parents' apartment. Then they bought another one and yet another… The result was the effect of a real estate snowball, which in today's situation turns into a real estate avalanche.

What would you recommend to Airbnb apartment owners?

It is almost impossible to survive an avalanche. Except perhaps if you're equipped with an avalanche search engine and help arrives in time. I don't want to create metaphors here, but we have prepared a special offer for Airbnb owners, which should provide them support in today's situation and help them repay loans. For more information visit our website YTPI.cz

Looking at current stock market curves and stock exchange behavior, could real estate investment be a safe "haven" at the moment? What would you, as an expert, recommend in such a case?

The situation on the stock market once again confirms that real estate is the most stable form of investment. We are witnessing the biggest drop in the Dow Jones index since 1987. Where is gold today, the most stable investment according to economists? Declined 20%?

I wouldn't be surprised if Donald Trump closed the stock exchange for quarantine soon. There might be people who enjoy falling curves, but our company offers investment in things that are certain. And they exist right in your country. We focus on real estate in interesting Prague locations that are very attractive in the long term.

What would you recommend to people, who are currently considering buying an apartment or a house?

You have a great opportunity that doesn't repeat very often. A pandemic has hit a market moving at high speed. Who could have anticipated such a development?

At this point, we are all aware that the quarantine won't be over in a week, but eventually, just like China, we will return to business as usual. And it will already happen while some people will still be recovering.

The question is whether the potential purchasers will then negotiate better terms. But the fact is that most developer projects under construction are already sold out. The CNB is likely to cut interest rates and we all need to live somewhere. These are the factors that need to be taken into account.