Real estate, like almost every aspect of our lives, has taken many blows during the pandemic.
People fled the big cities and actively sought out country houses for rent, swept away new buildings like pies in a period of scarcity and spent the last of their money to buy a home. Families trapped within four walls yearned for more space, tenants overpowered landlords demanding lower rents, but retail storefronts and office space were still empty.
Now that we understand what we’re dealing with and realize that COVID is here to stay, it’s time to look to the future and assess the real estate market’s prospects. Why? Because the real estate and construction sector has always been the flagship of future economic recovery, population migration, consumer demand and more.
COVID-19 accelerated the growth of online shopping and the decline of retail
An Ernst & Young survey in 2020 found that 33% of consumers expect to shift more to online shopping; in 2021, nearly 40% said they still shop less in physical stores than before the pandemic. This trend is likely to continue into 2022. There may not be such explosive growth in online sales, but many have come to appreciate the convenience of online shopping.
Growing social distance
COVID-19 also raised the debate about the importance of open public spaces and the disproportionate access to them by different demographic groups. Mass development, especially in large cities, reduces people’s access to recreational areas, which is one of the reasons for the continued spread of the virus. We believe that the state will be forced to pay more attention to the need to grow public and recreational spaces precisely in order to reduce overcrowding. And this, in turn, may lead to an increase in the quality of life of the population of large cities.
Migration to the suburbs is growing and will increase
Many people are moving to the suburbs near cities to be able to return to the office part-time or come in 2-3 days a week. This migration has already greatly increased the demand not only for finished homes, but also for land for further construction and, as a consequence, the growth of prices for suburban housing, which seems to replace the trend of buying new buildings in 2022.
The cost of construction materials will continue to grow
Purchases of apartments, new constructions, houses and plots of land will entail the necessity to carry out construction and repair works in them. As a consequence, there has been an explosive growth in the cost of building materials, which have risen by more than 30% by our estimates in 2021. There is no reason to expect a reduction in the cost of building materials in 2022 due to the huge unmet demand and the ongoing renovation program.
Reducing the size of apartments
The sharp increase in the price of apartments and building materials with simultaneous stagnation of incomes and acceleration of inflation is forcing developers to look for new ways to stimulate demand. One of the main drivers of the demand for real estate in such conditions is the reduction in the area of apartments. Studios are starting to take up more and more space in the range of many developers. The tendency of even more reduction of the average area of apartments will continue in 2022 and we will see new records in minimizing the area and entering the market of mini-apartments.