Not only has luxury real estate withstood the blow, but it will probably be one of the few to come out of the current crisis on top.
“At a time of great scepticism on the equity market, when liquidity seems risky, high-end real estate is asserting its status as a safe haven”, explains Thibault de Saint Vincent, President of BARNES. “Indeed, everyone can measure the precious benefit that owning a premium property brings during this period of lockdown. Both a sound and vital investment, bricks and mortar are proving to be an invaluable asset in these difficult times”.
In this highly volatile situation, having a clear view of the market and its environment is of crucial importance. Thanks to its local knowledge, the quality of its expertise and the scope of its services, BARNES is able to provide a precise response to the needs of its clients when it comes to the art of living. Its extensive experience has seen it endure and overcome numerous crises. Its global vision that is constantly updated positions it as the guarantor of clear and immediate arbitration.
The COVID-19 crisis has emerged against a backdrop that has been extremely favourable to high-end international real estate. Over the last dozen years, demand has exceeded supply around the world despite markets that differ in terms of the political and economic factors specific to each country and property profiles that differ from one city to another, and from one beach or ski resort to another.
A physical haven, and a professional base camp
The coronavirus has emerged in a euphoric market in Paris, a market that was beginning to rebound in London with the pending Brexit, one that was beginning to wane in Madrid and conversely a market returning to growth in Miami... The recovery from the crisis will therefore be different in Paris, in Madrid, in London and in Miami. It will also differ from one holiday destination to another.
High-end real estate had already been considered a safe haven for some twenty years from a financial point of view. But the COVID-19 crisis has shown that having a well-located quality property with large volumes, a great view and a charming terrace or garden is also the best haven from a hostile outside world.
Indeed, property is not just a financial haven. It is also a physical haven in addition to being a professional base camp. Most buyers are now fully aware of this.
This crisis is unlike those that have come before.
The 1992 crisis which followed the outbreak of the Gulf War at the end of 1991 marked the end of a long upward trend in real estate worldwide, with prices falling almost 50% between 1992 and 1997 in France. In 2008, the global financial crisis caused a decline in real estate around the world, with a relatively moderate fall in prices of around 10% to 20% The crisis was also relatively short-lived, given that it lasted between six months and two years depending on the country.
The COVID-19 crisis is different from both of these for various reasons. First of all, high-end real estate was not considered a safe haven in 1992 to the same extent as it is today. And in 2008, the main players, whether sellers, buyers or investors, did not have as much liquidity as they do today.
The current context is inspiring greater confidence despite the air pocket of three to six months expected after the end of lockdown, set to see a fall in the number of transactions but still with ‘necessity’ sales and a few ‘opportunity’ buys.
Following this period, towards October or November 2020, transactions should pick up again although no doubt with prices slightly lower than currently.
Is a price drop looming?
It is still too early to draw conclusions as contradictory signs have been emerging over the last few weeks. Examples of ambitious transactions concluded at the agent price during lockdown demonstrate the strength of the Parisian market. Rather than a fall in prices, there will likely by a pause in their upward pressure in the coming months. Luxury real estate has thus demonstrated its stability and its status as a safe haven.
More generally, in all of the countries and at all of the destinations where BARNES operates, it is interesting to note that clients continue to express their readiness for increasingly global support when it comes to their investment choices. Indeed, beyond classic residential real estate, BARNES offers expertise in vineyards, golfing, hunting and yachting, thus enabling it to provide the best advice to clients who have reason to be unsure. This combination of local expertise and international perspective is the key to luxury real estate of tomorrow.
BARNES continues to pursue its goals of listing the most exceptional properties in the world’s most popular cities and holiday resorts. And more precisely, consolidating the status of luxury real estate as a safe haven.
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