3 Reasons Why Housing Market May Revive
We surely are in uncertain times. The sudden outbreak of Covid-19 has caught us unaware. Mostly, for all of us, this is the first ever pandemic we are experiencing in our lifetime. Hope so, this is the last one too.
This pandemic suddenly
brought most of the economic activities to a standstill and impacted most of
the industries, including real estate. Property market activities have almost
come to a complete halt- construction activities have completely stopped,
buyers are holding back their purchase in anticipation of a price correction
and sellers are waiting for sentiments to improve.
With the country now going through Unlock 1 and economic activities gradually restarting, let us see how the market dynamic plays itself out. We foresee some changes in the market which will have impact on the way the industry functions going ahead (Read our earlier article- Changing Trends In Real Estate).
Although nobody can really forecast the future with certainty, but over a decade of experience of housing market in Mumbai makes us strongly feel that housing market may not fall to the extent everyone is expecting and it shall see a revival soon, ahead of the overall economic revival.
What makes us say that the housing market may revive sooner than anticipated?
If 2008 global recession and any of the previous global disruptions are studied, you will see that property market has always revived ahead of the overall economy. In fact, prices have made their new highs in some cases. This, coupled with the below three factors, makes us feel that housing market will revive sooner than currently been anticipated.
1. Demand from First Time Home Buyers - Importance of Home Ownership
This pandemic has given
one message loud and clear - YOUR HOME IS THE SAFEST PLACE TO BE IN.
As it is, real
estate has always been a very important asset class, but the need to own one must
have got deeply rooted in the mind of the end users now. This is one of the
most important factors that may lead to the revival of the housing market.
We may see many first time home buyers entering the market now. Given
the impact that the concept of social distancing is going to have in our minds
for time to come, we may see many dwellers of co-living shared spaces now going
in for independent homes.
Although this stands true
for all markets, it has higher implications for Mumbai housing market because
of one unique factor. As per 2011 census, a whopping 43.02% of Mumbai
population consists of migrants. This also explains the continuous demand for
rental units in the city.
Although the current
pandemic has led to large scale reverse migration, it’s worth noting that the
social strata which has witnessed this reversal is not too relevant if we want
to look at the expected demand for real estate. The segment of migrants that
are the target audience for housing market and that may push up demand, still
broadly remains here– professionals, business owners, entrepreneurs, salaried
individuals working in the corporate sector.
2. Increased Thrust on Work-From-Home (WFH)
Another important factor
is the increased thrust on work-from-home. WFH will become a norm in many white
collared jobs, esp. IT industry and many service sector firms. WFH, if followed
with discipline and commitment, can lead to substantial cost savings for both
the employers and the employees, be more convenient for the employees, enhance
productivity and lead to a better work-life balance. More so, in Mumbai, where
an individual spends anywhere between 2-4 hours on an average commuting
to-and-fro work place, WFH will be a boon.
WFH would raise the need of having a dedicated work space in your home,
thereby spurring demand even from existing home owners who may now need a
bigger home than what they already have.
3. Housing is one of the Basic Needs
Everything said and done,
housing is ultimately one of the basic needs of mankind and structurally,
demand in India and, more so, Mumbai will remain due to strong demographic
fundamentals.
In India, the mortgage to GDP ratio
is still very low (around 10%). This coupled with factors like favourable
demographics, rising nuclear family culture, easy availability of finances,
overall improved affordability, social distancing & work-from-home mindset
post the current pandemic, etc. indicate that structural demand for housing
will remain high in India.
Bright future prospect is currently
overshadowed by the short-term fear created by Covid-19 pandemic. But remember,
this too shall pass.
It is difficult to
predict the future with certainty, but given the above factors and general
benefits of investing in real estate over long term, I somehow still get sound
sleep at night knowing that my investment portfolio is heavily skewed towards
this asset class.
If the above arguments sound logical and you are wondering whether you should consider buying a home now, then do read - Should One Buy A Home During Pandemic?
Neha Agrawal - Co-Founder, OPENMINDS
nehaagrawal@openminds.co.in | +91 9820402693 | www.openminds.co.in
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