As industry commentator Mike DelPrete neatly summed up in his recent Emerging Models in Real Estate Report, "the [real estate] industry is moving very slowly, but it's never moved this fast".
Real estate is a particularly parochial sort of industry though. When we asked interviewees of our Agent Perspective series if agents in their countries paid attention to news outside of their country, the answer from all was a resounding 'no'.
We suspect that it's not just the agents. As one Online Marketplaces reader told us recently, we tend to assume that what is happening in our bubble is happening elsewhere too.
So how has the pandemic affected the housing market in Ukraine or in China, and how have the portal businesses there reacted? Has it been the same as what people are saying about the US or Europe?
We asked 7 experts from around the world to tell us how the pandemic has affected supply and demand in the market they operate in and what impact there has been on property portals:
In the first quarter of the pandemic, demand collapsed by 90%, so it was pretty much a supply sided market with no one buying. Now that everyone is accustomed to the lockdowns and businesses have adapted accordingly, we saw a return to normal, more or less, until July of this year. From July onwards we saw an increase in demand and a decrease in supply at the same time, which has increased pricing in some areas.
Initially, the supply was there, but agents just weren’t willing to pay for ad placements, which is the main revenue for 95% of portals. For two players who offer pay per lead systems, us being one of them, we could weather the storm and look at a brighter future. Now with demand picking up, we have seen portals increasing pricing to list and market consolidation is speeding up.
The portals which have demand are going to gain a significant advantage in the market and the outlook for the next few years seems bright for them. There has also been a shift in demand preference, with people moving to larger apartments or if they can afford it, moving into houses. This trend has been great for agents because that means larger deals and hence, larger incomes.
Southeast Asia is entering into an unprecedented post-covid era where both supplies and pent-up demand is high, fueled by an overhang build-up prior to COVID and rapidly growing population, urbanization and middle-class income. The coming 5 years is going to be incredibly exciting but competitive for developers and the real estate industry and will drive rapid transformation in PropTech.
One cannot talk about the UK housing market and the pandemic without mentioning taxes. As the UK's first lockdown took hold the UK Government effectively closed the housing market from 27 March 2020 until 13 May 2020. The UK Government was worried about two issues facing the UK Housing market: falling transactions and falling house prices, therefore, in order to kick start the housing market the UK Government raised the Stamp Duty Tax threshold from £125,000 to £500,000.
This one tax change led to the biggest increase in house prices and housing transactions that we had ever seen in the UK. When the global economy was failing the UK housing market was thriving. Ironically house price growth significantly exceeded the stamp duty savings on offer. On average house prices in the UK have increased by £31,000 (+13.2%) since the start of the Stamp Duty Holiday in July 2020 compared to the average stamp duty saving of £3,300. This means that whilst home sellers are £31,000 better off, homebuyers are £27,700 worse off.
The stamp duty holiday frenzy has led to a shortage of stock to sell as demand was greater than supply, which has led to estate agents increasing their marketing spend on portals to win more instructions. It is fair to say that no one predicted that the UK would experience a housing market boom in the face of a global pandemic. However, the party will end soon, the music has been turned down since 1 July 2021 as the Stamp Duty Holiday threshold was reduced from £500,000 to £250,000 and it will return to pre-pandemic levels of £125,000 on 1 October 2021. History tells us that transactions will have been pulled forward by the Stamp Duty Holiday so expect a lull in Q4 2021. Meanwhile, estate agents will be fighting hard for stock and spending their marketing dollars on portals, so the portals are likely to once again be in the prime location - prospering in both the good times and the bad.
For more than a decade, the UAE has been a buyers market, where the supply of properties was abundant and buyers had choice. In the Summer of 2020, the situation changed. The lockdowns were lifted and buyers rushed to the market to benefit from the lowest mortgage rates that were ever offered in the UAE (2.5%). But buyers went for a particular type of property.
Villas with a garden and a pool or apartments with a balcony and of course a sea view. These properties were in high demand and the supply quickly dried up, driving prices up. Initially, only villa prices went up, but prices for apartments are also now on the rise, especially if they offer a view.
It's been good for property portals. When the market is hot, agents are focused on what they do best, closing deals while we focus on our core promise, delivering engaged and informed buyers to our paying customers. In a hot market, agents make more commission and usually reinvests a good portion of that in digital marketing.
The U.S. is extraordinary in the world of real estate because of the MLS, the platform on which nearly all agents share listings and work together to make transactions happen. What this means for real estate portals is that listing here have always been considered content rather than advertising. Portals display listings for free, and, in fact, sometimes pay fees to MLSs who supply them with aggregated listing feeds.
Over the past couple years, however, this system has begun to show signs of weakening. An increasing number of agents and brokers are electing to withhold listings from the MLS so they can sell them within their own company or office and therefore avoid compensating an outside agent who brings a buyer. Brokerage companies in the states having been facing eroding profits for years now, and this is an attempt to stem the bleeding.
We are also simply starved for inventory. Demand is through the roof, and there simply aren't enough homes to meet it. This is fueled by a number of factors, including low levels of new home construction, restrictive zoning (land use) policies, record-low interest rates, and moves driven by our new "work from anywhere" reality. The fact that we are in an extreme seller's market also contributes to a growing sense that a property can be sold quickly without placing it on the MLS, or on a portal. This view is of course, short-sighted, but so it goes.
In an Indian market where monetization of purely intermediary portal businesses is still very tough, there are three trends that began before the onset of the pandemic but which have been accelerated since its arrival in the country.
There is a well-documented population growth with a rising middle-class which means that people are moving to slightly larger homes which then puts pressure on developers. This sort of property transaction has been where portals have concentrated their efforts in the market.
There is also the increasing digitization of the real estate value chain which the pandemic helped accelerate.
It's not just the digitalization of the search and discovery phase of the value chain but all other aspects as well. It may not be at the same rate that is being seen elsewhere, but it is noticeable in the Indian market.
Perhaps most encouragingly for portals, there is a change in the makeup of agencies. There are between half a million and a million agents in the country with 95% of the agencies made up of one or two-person operations which only act locally. Increasingly though, people are gravitating towards brand names rather than the one or two-person agencies that have traditionally made up 95% of operations.
Covid has had a smaller impact on China's domestic housing market than it has in the US or Europe. Instead, regulatory changes aimed at preserving affordability have reduced price growth in the hottest markets. These measures include official guidance prices, higher investor financing costs, and prohibiting real estate agents from providing price quotations for existing homes in some hot markets.
The most innovative companies are offering an end-to-end marketing and sales solution that integrates a smartphone app, a network of real estate agents, and online property marketplaces. In the past, all of these might have been operated by different companies. Together, they are much more powerful than the sum of their parts.
Over the last few years, the scarcity of quality housing and the difficulty of building it has been the overriding factor influencing both the new-build and the secondary market. Because of this, the policy of the portals has generally been to facilitate the insertion of content without rocking the boat with listings price changes.
Due to the pandemic, there have been several changes in the behaviour of buyers, vendors and agents. The restrictions on movement have led to the market making a big step towards technology as an indispensable tool in the process of acquiring a new home.