What will be the impact of coronavirus containment measures on the real estate market? It is difficult to make a prediction, but analyzing what happened in China may offer some clues.
We have talked about this with Long Fang Hu, CEO of Bafre, a Spanish-Chinese real estate agency that has been operating in Madrid for 15 years. Market connoisseur in both countries, He tells us how he sees the situation there and, especially, what can happen with foreign investors in Spain -your main clients- in the medium term.
Prospects are good, as long as companies adapt as soon as possible to the new reality and ensure maximum security for their customers, both in offices and when visiting homes. It's more: some of the measures they have taken these weeks, like real estate video conference calls, can become standard practice from now on.
Fotocasa: How has the Chinese property market behaved in recent months?
Long Fang Hu: In China, confinement began in Wuhan on 23 from January, and in the rest of the country a few days later. If we do the simile with Europe, Wuhan could be Italy and all of China the rest of the continent. In economic terms, where they have suffered the most is in Wuhan; in the rest of China the suffering has been, Inside the gravity, more temporary. Regarding the real estate market, the break has been practically total across the country in January, February and early March, because people could not leave their houses to buy housing. It is the same that we are living here, but with much larger dimensions.
Fotocasa: How has the real estate market in China reacted after the confinement?
Long Fang Hu: Beginning in mid-March, confinement began to relax in much of China. I have been talking to large entrepreneurs in the real estate market of residents in the country and what they tell me is that, compared to last year's sales in March, the volume of sales units has decreased by 30% in the main cities. It is important to highlight this point, because large cities are not the same as smaller populations. Here I think the same will happen: Madrid and Barcelona will surely recover before León or Palencia, for example.
From my point of view, I think this decline in 30% It is not much for everything that people have suffered in these months. There are people with contained demand and need to buy to live, as long as your current financial situation will allow it. But there is also a high percentage of people who will not be able to buy. I think the buyer profile will be more specific and with specific motivations: I want a bigger house, I want to live near my parents, etc. That is the profile that you have been buying already in March in China. And also the investor profile, which will also exist here: people with capital, resources or dividends to invest will surely opt for real estate product. In China, as it also happens in Spain, you have the mentality of safeguarding brick money, in real estate.
Fotocasa: And what are the forecasts in China for the coming months?
Long Fang Hu: It must be borne in mind that in China the State is not going to focus its efforts on the real estate sector but on the industrial and domestic consumption. In the real estate field, the forecast is to help facilitate, streamline and have a constant evolution, but they are not going to promote it to boost the economy. That is to say, will make it stay, not to go down but not to shoot either. I think they will lower tax burdens and interest rates, and they will inject liquidity into the market so that people can access housing more easily. The objective is that the real estate market is constant and sustainable.
Fotocasa: How do you think the new situation will affect Chinese investors who buy in Spain?
Long Fang Hu: After talking to China's largest agencies, with which we collaborate, and with our own headquarters there, what we see is that the health situation has made much talk about Spain, now everyone has heard of the country. In the short term it will depend a lot on how the current situation is managed, and that depends on the government. But in the medium or long term, is going to have a positive effect, because you will have a better knowledge of Spain. And when this happens and you forget, because in the end everything is forgotten, there will be interest in our cities and in our product. There will be many investment opportunities that this type of client may be interested in., They are going to see what Spain can offer them to come and live here or to invest here. I believe that in the medium or long term, by the end of this year or early next, We will have a wave of Chinese customers who will come to buy.
Fotocasa: What is your current situation regarding Chinese customers who want to buy in Spain?
Long Fang Hu: Right now we are in high demand too, but people can't come. Flights are restricted, and even if they weren't, you will not travel to the other end of the world if you have no need, you are not going to risk. In fact, before the state of alarm was decreed in Spain, we had already adapted.
Since January we have been making visits to the properties by videoconference and we have been able to offer properties to our clients in China without them having to travel to Spain. It is evident that this way of selling requires a period of maturation for the customer to get used to, but especially for the investing client, who does not come to live, I think it can be done very efficiently.
Fotocasa: What measures have you taken to adapt your operation to the current situation?
Long Fang Hu: As a company we are seeing what we can do, or what are we doing already, to adapt to the needs of our clients. We continue to have demand, clients who are looking for an apartment to buy continue to call. As now the houses cannot be visited, There are two options: tell them that you will call them when the confinement ends or find solutions. U.S, as we already had a virtual visit for our clients in China, we are using the technology that we already had for clients here. It's more, in addition to those more impersonal visits, we are also making visits by video call, During which our advisor can teach every detail of the house and answer questions on the go.
evidently, that does not replace the face-to-face visit. That is why we offer to make a reservation by deposit conditioned to see the house when it can be made. This takes a lot of work and, facing the future, it can be a methodology that can be maintained. This visit by video call is not final, but it helps to rule out options that don't interest the buyer. Instead of investing time and commuting, a first virtual visit is made, more real than simply seeing photos and that allows to appreciate much better the dimensions and possibilities of the spaces. The physical visit is made only to those homes that do meet all customer requirements.
In the end this situation will lead us to sharpen wit, not only during confinement, but to improve as a long-term sector. In the same way, I think teleworking is also here to stay. AND, apart from what the government can do, we as people, as companies and as workers we will have to do our part to improve security. At our branches in China we have already implemented specific measures, with an extensive internal protocol that we will also apply here when the alarm state is raised, regardless of whether the government says it or not. We will guarantee safety for our workers, for the clients who come to our offices and for the owners who receive us in their houses. This last part is going to be very important for the sector.
Fotocasa: And how do you expect the housing buying and selling market in Spain to evolve in general??
Long Fang Hu: The price will be negotiated much more with the owners, because supply increases and demand falls. The price will have to be adjusted so that the house can be sold. And what will happen is that whoever regularizes the price before, will sell first. The more time passes it will be worse. Surely there will be homeowners right now, premises or soil that will think to wait to see what happens after the confinement in the hope that it is not so serious. I think that's fooling yourself and not being realistic. Whoever first regulates their offer to the market demand will have a much greater probability of selling. Those who wait for everyone to do the same will lose that competitive advantage. Those who really need to sell should not give it much thought. Those who do not need can wait a year and a half or two years and see what happens to the market.
Fotocasa: Many of your investor clients buy to rent. How do you think the rental market in Spain will behave in the coming months?
Long Fang Hu: The rental market will continue to be very interesting. There will be more offer, and that is positive for prices to be regularized. But there will also be more demand, because many people who were going to buy will choose to rent. In the big cities, also, The demand by people who move for work reasons from regions with worse economic prospects and who are going to have a housing need mostly for rent may grow even more..