EFFECTS OF PANDEMIC ON REAL ESTATE MARKET
Role of real estate industry
Pakistan’s real estate market is the backbone of the country’s economy. With the onset of covid-19 in 2020, the market has shown various trends based on properties’ location and type. The sales of big, luxurious houses have plummeted while the demand for smaller houses has sky-rocketed. All these results are due to the extraordinary impact of the pandemic on the lifestyle of different people. However, no effect has been observed on agricultural land sales, mainly because this practice has not been affected by the virus on a large scale.
Reduced sales of commercial spaces
The post-COVID-19 work environment has completely changed. In the past, companies and businesses invested massive capital in constructing office and commercial buildings – the face of pre-COVID-19 businesses. However, the tables have completely turned because of the lockdown. Now, more and more people are working from home, companies are shifting online, and the need for vast office spaces – at least for Millennial-owned businesses – has died down. This has had a grave impact on the sale of corporate properties. However, a new hope is in sight as new developers can incorporate these needs in new residential projects.
Effect of NPHP
The Naya Pakistan Housing Scheme, if successful, will help in increasing the prices of previously unattractive locations. This scheme will build houses on the outskirts and the slum areas of major cities. The houses will be allotted to the people already living in these areas. Imagine a previously slum area now a fully developed residential scheme, standing next to the lavish and over-priced houses, but with a significantly low price. This development will not affect the prices of already developed schemes. However, it will help in inflating the value of these slums.
Increase in demand for small houses/flats
Due to covid-19, a significant percentage of the population faced financial setbacks. They were laid off from jobs, lost their houses, and lost loved ones. All this aftermath of deadly pandemic points at one thing: sustainable housing. From the early 2010s up till now, we have seen people gravitating towards smaller, compact houses with lower prices and rents and greater practicality. It is reasonable to assume that a small house will be a lot easier to manage during a pandemic-like situation than a luxury house. At the same time, job security is not guaranteed at all. Therefore, the pandemic has increased the demand for smaller houses and flats.
The post-Covid-19 world is working online. This has given the manazil real estate market a golden chance to bring innovation to residential properties. Now, most small houses would be considered valuable if they have a small, neat office space. Today’s businesses have all shifted online, and with the increase in freelancing, office jobs are slowly dying down, with more people preferring to work from home. Considering these changes, the real estate sector will soon experience a rise in sales as more people come aboard the idea of online work.
Reduced number of buyers
With joblessness and poor financial conditions brought about by the pandemic, people are reluctant in purchasing a new property. In the past, buying multiple properties and then selling them when the price inflate, was an investment. However, due to the reduced number of buyers in the market, the sellers are being forced to reduce the prices of their properties. This has caused a negative impact on the real estate and, in turn, the country’s economy. With more and more people looking to sell their large properties and fewer people willing to buy, the real estate sector is somewhat experiencing a financial deadlock.
Recovery from the 2018 recession
The real estate sector has previously experienced recession due to unfavorable policy changes. Due to the pandemic, the recovery from that recession was severely damaged and further worsened. The real estate sector is walking on crutches right now. However, there is no serious impact on well-developed societies. The effects are prominent in small-scale real estate properties which are not managed by big corporations. There is a hope of improvement once the pandemic is over, but that improvement depends on well-planned and thought-out estate development.