Crises show us that business is not just the movement of money, but the presence or absence of trust. And in this crisis, each individual business will go through it differently, and each individual business will cope or not depending mostly on the state it is in when it enters the crisis.
It is difficult to predict what the consequences will be. Quality properties will always hold their price. The interest in properties outside the big cities, in properties on the Black Sea coast will also hold their prices. Overpriced properties in Sofia and some of the major cities may lose 5-10% from yesterday's price, but we will not see 30% and more price drops. I even suggest that there may be some properties that will increase in price. Still, property is a pretty safe investment.
When we look at the market today and think about its tomorrow, we have to remember what this business was yesterday. To summarise - dynamic, with an increased interest in the new construction, growth of transactions with larger apartments, with overpriced properties in some areas and so on. But at the same time - unregulated, without clear rules of operation, a significant part of it with a presence in the grey sector, with unfair practices in some brokers.
That is why we cannot put together a common denominator of how the crisis will affect the whole sector. It will not be the same for everyone. Even now, we are seeing exactly that. Even though the rules are the same for everyone - direct contacts are limited, employees in most companies work from home, only emergency transactions are conducted with notaries, the companies themselves react very differently.
A number of companies are choosing to reduce the number of properties advertised, drastically shrinking their advertising budgets. At the same time, they do not initiate communication with their clients and take measures to optimize their costs. Some of these include redundancies. These are largely the companies that do not have a large enough market share and their business model is not sustainable enough.
Other companies take a totally different strategy. Currently they prefer to increase the advertising of the properties in their portfolio and use the situation to be proactive towards the market and their customers. There is a very nice thought that says: 'Don't let any crisis go to waste'. Those who manage to heed these words and are agile enough to mobilize their teams and build new partnerships can look forward to a bright future after COVID-19. The pandemic is also a great time to examine both the market and the reactions of agencies, clients and the sector in general.
One thing is certain - after the end of the epidemic, and hardly anyone doubts that there will be one, the state of the two groups of companies and their actions now are fundamental for their future tomorrow. I am sure of this because it is not the first time the property market is facing such a crisis. Imoti.net specifically has a 20-year history and has already been through one once. Then we witnessed a serious fallout from the market of property companies. It is possible that to some extent the consequences now are similar to those of the 2008 crisis. My expectation is that property transactions will be curtailed, investors will pull back, new construction will slow down, the commercial and business property market will shrink, and lending requirements will increase. Neither property prices are so overvalued, nor do banks lend frivolously. There is more good news - the recovery will happen faster. As soon as the epidemic is contained, business will turn around - cautiously, gradually, but we will all want to get back to normal.
At the moment, property deals are declining - old ones are being completed, only urgent ones are being concluded. Sellers are limiting viewings in their properties because they are complying with the measures or because they prefer to wait - after all, the property has good liquidity and the funds from it may be more needed in the next stage. Buyers also prefer to wait because they assume that prices may fall.
Indeed, most of the half of Imoti.net users are worried about the outbreak and the measures to contain it. But over 80% of users, in spite of everything, continue to be interested in property, dream of or plan on acquiring one to meet a need. Or to change their lives.
Fear of COVID-19 gives a chance for changes
There is mortgage lending. Banks seem stable and there are no serious reasons to assume that interest rates will rise. Jobless growth is rising, but they are hardly the potential buyers. At this stage only the fear of COVID19 is holding the sector back, but it is also giving it a chance to change. In three or six months, the fear will be gone and the wheel will have to turn again. Who does it depends on how it is reacted to now.