The current COVID-19 pandemic has hit the property market hard. The market came to a virtual standstill during the months of lockdown and now that activity has started again, a number of changes and opportunities have emerged that are worth analysing.
The fact that estate agencies were unable to operate normally has put a large number of transactions on hold. This means that all the properties that have not been sold during lockdown are still available. This saturated market will be joined by the new properties that are expected to be put on sale as a result of the health crisis, pushing the supply even higher.
A number of industry analysts predict a significant reduction in the total number of transactions during 2020. While more than 500,000 properties changed hands in Spain in 2019, it is expected that this year the number of transactions will fall between 35 and 40%, giving an estimated total of about 370,000 transactions for 2020.
Logically, with a large increase in supply and the expectation of a significant drop in demand, the property market will offer good opportunities that will favour the buyer. With this analysis of the possible future evolution of the market, we propose to answer three essential questions that will guide your decision to buy a property and find the best deal:
What kind of property should I buy?
It is important to have clearly defined your search criteria and align them with what will really satisfy your specific needs. In a shifting market, properties may be offered at below-average prices that may tempt you, for example, to agree to buy a flat with one bedroom less than you need or to change your initial search area.
If your decision is governed by clearly defined criteria, you will be able to put aside this purchase opportunity, as time will surely prove that it would have been a mistake.
At what price and when should I buy?
There is considerable uncertainty as to whether and how much property prices will fall in the coming months. The most authoritative forecasts predict that prices may fall by 5 to 15% during 2020 and that market recovery will not start until the second quarter of 2021.
The recent 2008 recession showed that the main factors that influence by what percentage each property will lose value are location and dwelling typology. By way of example, a 3-4 bedroom flat located in a good part of the city will lose less value than a 1-2 bedroom flat located in a less sought-after area.
Another factor that can influence the decision of when to buy is the availability and the terms of financing.
At present, eligible buyers will be able to obtain a mortgage under very favourable terms as a result of the low interest rates and the fact that financial institutions are once again offering to finance up to 90% of the property’s value, and even 100% in some cases.
To summarise the three questions in a single answer, the right time and price to buy a good opportunity can be defined as that which enables you to acquire a property that covers the needs you have defined and which, a few months ago, was beyond your budget.
Obviously, each transaction will need to be analysed in depth from a position of strong market knowledge in order to separate the good purchase opportunities from those that are not, even if they are offered at a considerable discount.