Unlike the global recession in 2008 when house prices collapsed, this time, around in the COVID-19 pandemic, prices are soaring. Many buyers are panicking as from New Zealand to the United States, Germany, India, Spain, China and Peru, the same phenomenon has taken hold – home prices are skyrocketing.
Among the 37 wealthy countries that make up the Organization for Economic Cooperation and Development (OECD), real house prices rose by almost 7% between the fourth quarter of 2019 and the fourth quarter of 2020. This is now seen as the fastest year-on-year growth in the past two decades.
Analysts say the pandemic has benefited house prices. Governments across the world helped homeowners by temporarily banning repossessions and providing trillions of dollars of support for workers and businesses. Interest rate cuts kept mortgage repayment affordable in many places, while temporary reductions to purchase taxes in some markets spurred home buying. These measures, in fact, cushioned the housing market from the COVID-19 recession. But the pandemic itself has actually turbocharged prices.
As people were forced to transform their houses into offices and classrooms, it didn’t take long for a race for space to take hold. Wealthier individuals, as per CNN Business, in several countries have fled cities for larger suburban homes with more outdoor space in the anticipation that they won’t need to commute into central offices as much even after the pandemic ends. And many of them are financially in a better position than they were before the pandemic hit, since they have spent less on vacations and eating out, and can therefore spend more on home purchases.
Hitesh Oberoi, the CEO of Info Edge, which owns India’s largest property portal – 99acres.com, said COVID led to activity coming back into the market. “A lot of people want bigger homes. Many people felt that because the economy was tanking they would get good deals.” Oberoi told CNN Business that falling interest rates and lower duties on transactions in some parts of the country have also helped, but the market is slowing down once again as India battles the second wave of COVID-19 infections.
In the United Kingdom, commuter towns within easy reach of London, such as Winchester, have seen property values surge. Daniel Harrington, international head of growth at Fine & Country, said anything with a home office within an hour train ride of London is going for 10% above market value. He observed in capitals such as London and Paris, wealthy executives trading their centrally located houses for something bigger but cheaper further out of the city, leaving them with enough cash to buy a small apartment downtown and a holiday home elsewhere.
And in the US, as per the National Association of Realtors, the number of sales of existing homes reached the highest level in 2020 since 2006. House prices rose 9% in 2020 and have continued to climb, with the median price of an existing home hitting a historic high of $329,100 in March. In Germany, properties are selling within two weeks of being listed and brokers are struggling to secure listings.
A UK buying agent compared this to twelve months ago when people were panic buying toilet paper for the fear that they might run out. “That’s very much the sensation we have today in the housing market,” he said.