Although the world has faced a lot of uncertainty over the past few months, the pandemic has highlighted humanity’s resiliency. That resiliency has likewise seeped into the real estate industry around the world. After months of being shut down in some cases, luxury real estate is now gradually making strides towards recovery on a global scale, but that recovery is more uncertain in some countries than others.
Inman recently touched base with luxury real estate agents in seven different countries to hear more about how their markets are faring at this point into the pandemic. Here’s what they had to say.
The coronavirus pandemic hit in the midst of political upheaval in Hong Kong. Many residents of the territory had been taking to the streets for months to protest a now repealed extradition bill that would allow criminal suspects to be extradited to mainland China in some cases, as well as other grievances like police brutality and implementation of universal suffrage.
Despite the territory’s political turmoil, or perhaps because of it, Hongkongers on the whole swiftly adopted widespread mask usage and a prominent protest group created a website tracking cases, monitoring hot spots and providing other COVID-19 resources.
During such uncertain times, Hong Kong’s luxury real estate market has taken a significant hit.
“The market’s activity is significantly reduced compared to an average year, down about 50 percent,” K. S. Koh, CEO and founder of Landscope Christie’s International Real Estate, told Inman in an email.
“Buyers are staying on the sideline and sellers are desperate,” he added.
Koh also said his inventory of luxury listings has declined by about 30 percent from this time last year, and homes are being sold at discounts between 10 to 30 percent.
Unfortunately, Koh and his team fear that business may take an even greater hit if unemployment continues to rise in the territory and an anticipated fourth wave of COVID-19 hits.
However, Hong Kong’s luxury market, Koh said, stands in sharp contrast to the residential market at large, which has recently seen an uptick in activity in the HK$10 million (about $1.3 million USD) and under price range.
“It’s very easy to forget that it’s even going on here in New Zealand,” Ben Hawan, a New Zealand Sotheby’s International Realty sales associate, told Inman in reference to the coronavirus pandemic.
While cases have surged across the U.S. recently, Hawan said life is pretty normal in New Zealand these days, resulting in increased demand from foreign buyers lusting for a lifestyle away from the pandemic.
“We’ve obviously seen an increase in inquiry from overseas and that’s a mix of expats, so Kiwis living abroad, and also foreign nationals,” Hawan said. “New Zealand does have restrictions on purchasing as a foreign national.”
“I see a lot of [expats] making long-term plans to hunker down here for the next one to five years,” in order to wait out the pandemic, he added.
Palpable market demand and inventory shortages has kept prices up and is “even pushing prices up,” Hawan said. As New Zealand nears the start of its summer season heading into the end of October, Hawan said he expects to see a “flurry” of high-end market activity.
But, although things look optimistic now, he said many people are actually holding their breath for a potential housing crash in the not-too-distant future.
“The general consensus is that we are facing a crash,” Hawan said. “And that comes off the back of the global situation as well. I think a crash in New Zealand is never as severe as anywhere else in the world — we are rather insulated, but the general consensus is that come March, April, May next year, we’re going to see a change in situation.”
Jason Zecchel is a Realtor with Coldwell Banker Horizon Realty in Kelowna, British Columbia, a region Northeast of Vancouver known as the “Napa of the North.” Zecchel said business in the area, which is also a micro-tech hub, was uncertain at the beginning of the pandemic. But, for the past three months, demand has been “huge.”
“We started out like every other price point,” Zecchel said. “A lot of uncertainty, and then not getting that spring inventory hitting the market really threw things sideways. Then we had the return of our dual citizens and our snowbirds, had a good first quarter, and then circling back to low inventory, nothing coming on in spring. We just had huge, high demand I would say since early August.”
“Locally, it’s insane,” Zecchel added. “We’ve had over 500 sales over $1 million in our area [so far in 2020]. That’s nearly a 90 percent increase from 2019.”
Because of strict border closures amid the pandemic, foreign buyer traffic on the whole has been down from previous years. But, Zecchel said the exception to that rule is traffic from U.S. buyers, which has been significantly higher this year.
He also said Kelowna has fared better than some other Canadian real estate markets during the pandemic because of its attractive geography (a “true four seasons,” access to ample hiking trails and Okanagan Lake); diverse economy with industries spread across tech, wine, agriculture, heath care and more; and relative affordability compared to nearby Vancouver.
Kelowna’s burgeoning tech industry in particular has become a big draw for U.S. tech workers. “[Tech companies] can attract that U.S. employee and pay them Canadian dollars,” Zecchel added.
Different regions in Mexico have been impacted by the pandemic in vastly different capacities.
In San Miguel de Allende, a major hub for expats and retirees located in the center of the country (fly-in-only territory), real estate has taken a hit from the country’s halt in tourism.
“Our city historically derives 89 percent of its GDP from tourism, so the entire city is suffering severely from the consequences of the pandemic, and local real estate activity — sales or purchases by Mexican nationals — are equally depressed,” Gregory Gunter, broker at Berkshire Hathaway HomeServices Colonial Homes San Miguel, told Inman in an email. “We have approximately a five-year inventory of listings on the market here, and six months of inventory in the U.S. is considered an equilibrium market, so our over-supply combined with depressed demand makes this clearly a local buyer’s market. Those few luxury sales occurring have often been closing at discounts of 20 to 25 percent off early 2020 pricing.”
Markets in beach towns like Cancún, tell a different story, however. Luis Mirabent, CEO of brokerage eproperties in Quintana Roo, said that though sales dropped initially, now he’s seen luxury buyers flocking to the area to seek out beach-side properties.
“The new thing is that there’s a lot of people coming to live on the beach side, in Cancún, Puerto Vallarta and Los Cabos,” Mirabent said. “That’s because the pandemic, it’s made people think about where they want to live.”
He added that people who lived in big cities like Mexico City, Guadalajara or Monterrey and frequented stores and restaurants before the pandemic are rethinking what they want. “Now, since they are [closed], they want to move to open areas like beaches, so they are moving to Cancún,” he explained.
In the ski markets of France, rental activity has experienced continued slowing, while the for-sale market has kept apace, said Stéphanie Mugnier of Groupe Thibon at Century 21 France.
“It’s much less risky to get into [our market] now,” Mugnier told Inman. “It’s been slowing down for a few months for rentals, for skiing or things like that. Most of the resorts had been closing before the end of the winter [because of the pandemic], so we had less activity on the rental part of the business, but we still had very good activity for other transactions.”
Mugnier explained that the ski market she primarily operates in, Les Gets, typically sees a lot of rental traffic from tourists from Great Britain visiting for the ski season. But, because British citizens are no longer allowed into the country without quarantining for 14 days, it’s deterred a large portion of rental customers she’d see in a normal year.
However, residents of countries throughout the European Union, like Switzerland, Belgium and the Netherlands, are continuing to come to French ski towns (with no travel restrictions in place throughout the EU) looking for more space and a less pricey alternative to Swiss ski towns.
While there’s a lot of activity in these tourist areas, Mugnier said buyers have largely been paying in cash with banks less willing to lend money out during a pandemic.
“In France, it has become a little bit difficult to get money from the banks because of COVID,” she said. “But, we’ve got a lot of cash buyers still buying luxury goods and banks are always following the cash buyers. So, for the real estate market, it’s still good.”
United Arab Emirates
As in Cancún, luxury buyers in Dubai have been flocking to beachfront properties where they feel there’s more room to breathe.
“We’ve noticed buyer activity on the rise in beachfront properties, particularly villas,” Eric Knaider of Luxhabitat Sotheby’s International Realty told Inman in an email. “This is mainly due to recent social distancing trends in which residents have been favoring independent villas over apartments.”
Knaider said although major development projects launched in 2015 and 2016 led to an influx of inventory in 2020, the rush to waterfront properties in some areas has made sellers either raise their asking price or hold on tightly to their properties for the time being.
“With new homes being delivered in 2020 due to the surge of project launches in 2015 and 2016, there are certainly higher inventory levels,” Knaider said. “However, there is a shortage in particular areas such as the Palm Jumeirah and Jumeirah Bay as residents snatched up the majority of beachfront properties and plots as the pandemic weighed in on social distancing norms.”
Dubai initiated a strict lockdown period in April when all but essential businesses were closed and residents had to apply for a Dubai Police permit in order to leave their homes for essential activities like grocery store or doctors visits. Then, the city reopened to visitors in July while businesses adjusted to a slew of new safety protocols. Knaider said he thinks the region’s tough response to the pandemic will help the market continue to grow through the end of 2020.
“We’re optimistic,” Knaider said. “We’ve seen early stages of a market rebound from the lows in March 2020; prices are up as much as 30 percent in some areas since then. We’ve seen a rise in new, high-profile clients coming into Dubai because of the pro-business environment the country provides and because of the country’s remarkable efforts in tackling COVID-19.”
The real estate industry in South Africa reopened at the beginning of June. Although there’s been encouraging market activity on the whole due to pent-up demand and low interest rates, luxury sales have been a bit slow to rebound, Chris Cilliers at Lew Geffen Sotheby’s International Realty in the Winelands of the Western Cape told Inman in an email.
“Most of this activity is being seen at the lower end of the market as the current record-low interest rate is encouraging many first-time buyers to enter the market,” Cilliers said. “And, as a result of the financial impact of the pandemic, a number of people have also been forced to downsize. At the other end of the scale are financially secure buyers who, after enduring lockdown in compact, low-maintenance homes, are buying larger properties with sizeable gardens. In many areas, the upper end of the market has been very slow on the uptake, however, in the Cape Winelands we have started to see considerable activity at the top end and properties are also achieving good prices.”
As has been the case in many places, buyers are also prioritizing their lifestyle over the conveniences of city living.
“Working remotely has become the new normal for many, so they want homes with additional space for a home office and good connectivity,” Cilliers said. “And as many people don’t have to face peak hour traffic on a daily basis anymore, lifestyle has become more important than convenience so many are choosing to live outside of the city, in quieter suburban or semi-rural areas or in coastal villages. The emerging ‘cocooning’ trend has also become more established and we are seeing an increased desire to recreate amenities within the home that offer authentic experiences of activities such as movie theaters, gyms and restaurants/bars.”