We’ve already written an article on the trends which are putting the residential property market under pressure, including changes in households’ size and type, housing prices which are rising faster than wages and an increasing lack of housing caused by demographic factors and slower administrative procedures. How is COVID-19 going to affect these trends?

COVID-19 will increase the demand for affordable housing

On average, households in Belgium and Luxembourg spend almost 30% of their income on housing. Although France is a larger country with a more varied housing market, the percentage of French households’ income spent on housing is also increasing every year.

Above all, these averages hide the reality of growing inequality: low-income households sometimes spend more than half of their income on housing.

The statistics in France reveal a contrasting situation:

• The proportion of home-owners is increasing in France: from 43% of households in 1968 to 58% today, something which can be seen as good news.
• However, the gap between tenants and owners is widening: although 73% of high-income households now own their own property (compared to 62% in 1990), households on lower incomes are now less likely to become home-owners than before, with just 31% of low-income households owning property today, compared to 51% in 1990. We can see that these difficulties are also affecting the lower middle class.

Of course, these trends are caused by property prices which are increasing at a faster rate than household income. In France, renting wasn’t always seen as a default solution, unlike Belgium where investing in bricks and mortar has long been seen as being of the utmost importance. But inflation in the residential property market has encouraged an increasing number of households to buy property: the richest households initially, gradually followed by any household able to afford it. Today, it’s increasingly difficult to buy a property on a single salary.

Impact of COVID-19

The economic crisis caused by the pandemic will only intensify the phenomena we’ve just described.

Governments have implemented some measures:

• Pausing evictions (until June in Belgium and until July in France)
• Deferred payments for mortgages (for a fixed term)

But these are all short-term measures and we know that households are going to continue to have financial worries for some time. In short, COVID-19 is going to exacerbate the housing crisis, particularly for households which aren’t so well off.

Our recommendations

• We have recommended significant investment in affordable housing for some time; this is now more relevant than ever. The challenge will be to provide modest but functional housing. This housing should feature cleverly designed spaces for families in smaller properties and at least some outdoor space. Lockdown highlighted the existing inequalities of current housing.
• Creative use must be made of certain mechanisms to build more housing: long-term leases, brownfield redevelopment, etc.
• There are other unconventional solutions too, such as “new-generation” housing models, including co-living, community and intergenerational living.

 

The search for multi-functional housing in the countryside

When lockdown was announced, many people living in cities chose to leave their apartments for their second homes. This is entirely understandable. No-one enjoys being stuck at home, but this can soon become unbearable in a small apartment or a studio. This is particularly true in cities like Paris, where the average surface area of property is 31 m2 (compared to an average of 91 m2 in the rest of France).

Impact of COVID-19

One (predictable) consequence of the pandemic is that many people are now looking to move to a property in a setting which offers a better quality of life.

• The property market has picked up. In Belgium, this recovery has been impressive. In June 2020, the leading property site in Belgium, Immoweb, received a record number of visitors. Estate agencies and moving companies have also reported a real uptick in business. Homes are selling well again, even more quickly than before the COVID-19 pandemic.
• Outdoor space (gardens, terraces, balconies, etc.) is now a top priority for buyers.
• Working from home is rapidly becoming the norm. A majority of companies want to introduce flexible homeworking on a long-term basis, even once it’s possible for employees to return to the office. Consequently, potential buyers are now increasingly keen to find sufficient or flexible space in which they can work from home.
• Working from home could have another effect: in a world in which some employees will no longer have to commute on a daily basis, living in a city to be close to the office will seem less important. Some people may choose to move away from cities to enjoy a better quality of life in a more rural area.

Our recommendations

As we have seen in retail, COVID-19 is accelerating trends within the residential property sector: a desperate need for decent housing at an affordable price, an increased number of people working from home, increasingly hybrid spaces and more.

Needless to say, the single-family home with a garden is at the top of everyone’s list in countries which went into lockdown. But how many people can afford this? In some countries and regions, population density and demand led to huge price increases long before COVID-19.

We’re convinced that people will always remember their lockdown experience and will be more focused on living in a property which offers a better quality of life. Natural light, a garden or a large terrace, a cellar for storing food and drink: these are just some of the criteria which will increasingly come into play.

Residential property players may (undoubtedly?) have to rework some projects, including their configuration and even their location, to adapt to the new expectations of potential buyers, tenants and investors.