Covid-19 has disrupted the global economy and few sectors have been unaffected, with leisure, hospitality and retail being particularly hard hit by lockdowns and social distancing measures. Residential real estate has also been impacted by the pandemic, but has so far proven one of the more resilient sectors.

While transactions fell in some markets between February and May, they largely rebounded to pre-pandemic levels in September and October, buttressed by stimulus measures, pent-up demand and low interest rates.

^{Note: Chart shows average monthly transactions in 2020 compared with the long-run average. For each city, we have used the latest monthly data available and compared the same period over the previous three years. China, Singapore, New York, Los Angeles, London, Dubai (Oct), Hong Kong, Tokyo, Seoul, Stockholm (Sep), Madrid and Paris (Aug). China sales are in the primary market and are therefore impacted by the launch of new projects. Transactions long-run average: 2017, 2018 and 2019 average.}

^{Source: Savills Research}

Transaction recovery has been seen in global cities. Wuhan has grown from zero transactions in February as a result of its lockdown to more than 22,000 in the month of October. Shanghai, Beijing, New York City, Singapore and Los Angeles have all seen triple-digit increases in transactions since the low points in their outbreaks.

In Europe, it is more of a mixed picture. As part of initial lockdown measures in some countries, property viewings and home moves were halted in an effort to minimise contact between people, reducing transaction volumes. Although the markets have reopened, in some locations transactions have yet to rebound to previous levels.

Spain’s extended lockdown has dampened its property market. Transaction volumes in Madrid fell 34 per cent in March, coinciding with the implementation of the lockdown, and have remained depressed in the subsequent months.

In Sweden, business in the capital continued largely unabated. Though the lack of lockdown wasn’t sufficient to eliminate a drop in GDP, it did ensure that the property market remained open and that transactions were able to continue. Transactions in Stockholm largely remained in line or even above their long-term average, standing 56.8 per cent higher than normal in July.

Current distress levels are much lower compared with the previous downturn. Unlike the global financial crisis, this recession is not rooted in the banking sector. Interest rates remain at record lows and are likely to remain low for some time. This makes mortgage debt affordable.

Prices have so far proven resilient. Property prices usually lag transaction volumes, however, so it is likely too soon to have realised the full impact. As unemployment rises and stimulus measures end, this could put pressure on prices. Low distress levels mean substantial falls are unlikely.

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Contact Kelcie Sellers

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