2020 in real estate was a year well-described by Churchill’s quote “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” According to Andero Laur, Liven’s CEO, many people who had been waiting for real estate prices to drop, missed the opportunity when it finally arrived.
In spring, during the first wave of the coronavirus, a great uncertainty about the future was prevalent. Some sellers were preparing for a recurrence of the previous economic crisis and were even willing to offer discounts up to 10%. The possibility of such transactions was discussed until the end of summer. With the end of payment deferrals in autumn, a major crash was predicted, which in the end did not happen. To everyone’s surprise, the transaction activity in the new development market returned to normal levels, and the price increase continued.
After such a development of events, the more pessimistic analysts have held back their opinions. This, in turn, has increased buyers’ confidence about the future. Somewhere in Europe, a mysterious money printing is taking place, and no one exactly understands how it will affect us, and how that money will reach people.
However, it will. First, through the price increase in more liquid assets such as stocks, and then through less liquid assets like real estate. Unlike the previous crises, Estonians have a significant amount of disposable income in their accounts, and there is a growing fear that inflation will decrease its value. The fear of inflation is what motivates people to buy real estate, whether it’s a new home for themselves or an investment property for rental purposes.
The permanently changed way of life.
The concept of remote work has been taken to a new level, and the world will never be the same again in this regard. A year ago, there were still many who had postponed learning the tips and tricks of participating in online meetings. By today this shouldn’t be an issue to any employee anymore.
Although many office building owners are confident that work will soon return to normal, it is a miscalculation that can become costly. While having an office space is still necessary for companies, the required space per employee is decreasing. More and more home buyers are looking for the opportunity to purchase a property that includes a separate space for working from home, whether it’s an additional room or a small dedicated office.
Over the past 10 years, the availability of 5-room apartments in new developments has been relatively rare. However, in the coming years, this is expected to change, and the selection of larger apartments will improve for home buyers. In office spaces, we are witnessing an increasing trend of shared workstations, and successfully organizing remote work has become a strategic challenge for leaders.
Individual entrepreneurs will disappear
Real estate development in Estonia has been an area where anyone could easily engage in. This is also why the term “developer” gained a negative reputation during the previous economic boom. The increasing number of new regulations and the level of professionalism among developers have created a situation where this old belief no longer applies. It is no longer possible to start a real estate development business like before.
We can draw a comparison with car manufacturing – it is unthinkable that anyone who wishes could become a car manufacturer. Or even if they did, would the customer be willing to buy that car? Designing buildings has become increasingly complex both technically and legally, and experienced professionals have years of experience along with past mistakes to learn from and do better next time.
Arrival of the virtual reality
Technological concepts such as VR (Virtual Reality) and AR (Augmented Reality) have become practical and value-creating applications in real estate development. Their implementation helps to avoid errors, increase efficiency, and assist homebuyers in making better choices. More and more sales are taking place before the completion of construction.
In such situations, virtual reality solutions are of great help to homebuyers, allowing them to explore the development before it is completed. In 2020, we will witness further advancements of technology used in real estate development, and the first AI solutions will be used in planning new buildings. Apple, Google, and Amazon are finalizing a common standard for smart home devices, opening up a fast track for the integration of new solutions into every new development.
The year 2020 changed people’s values and introduced new trends in home buying. This year, we will see an even further growth in consumers’ expectations in quality. Quality is the factor that’s becoming increasingly influential in shaping the market. Those who were planning to purchase a home, learned a lesson that they shouldn’t miss out on a good opportunity. This trend will continue in 2021 – pessimists will see challenges while optimists focus on seeking opportunities. There may come a time when the pessimists can say, “I told you so,” but it won’t happen this year.