Milan and Seoul both saw record amounts of real estate investment in 2019. But with the emergence of coronavirus, their residential markets are taking a big hit. (Credit: ANDREAS SOLARO/AFP via Getty Images; JUNG YEON-JE/AFP via Getty Images)
The year 2019 was a great one for real estate in Milan, the economic engine of Italy.
Office leasing hit an all-time record of 481,100 square meters (5.2 million square feet), and office investment reached an all-time high of 3.6 million euros. On the residential side, Milan stood out as the only large Italian city to see rising home prices, thanks to a wave of new luxury development.
“Why Is Milan’s Real-Estate Market So in Fashion Right Now?” the Wall Street Journal asked three weeks ago, when Italy still had only one confirmed case of COVID-19, the disease caused by the new coronavirus. But things changed quickly.
On Monday, the Italian government announced that it would be extending quarantine and travel restrictions across the entire country — and not just the most heavily hit areas in the north, including Milan and Lombardy. The World Health Organization officially declared the virus a pandemic on Wednesday.
Data shows that the rapid spread of the epidemic across Italy has already impacted the local real estate market. Home sales in the first two months of 2020 were down 7 percent year-over-year in Lombardy, and down 12 percent in Milan, according to Scenari Immobiliari, an Italian real estate research institute.
“In the month of March a very strong reduction is probable, which is already evident in visits to apartments for sale which are less than half of what they were a year ago,” Scenari founder Mario Breglia told local media.
Breglia added that demand remained high, and he expected a half-year “rebound” after the emergency. “There are no pressures on prices, and on the contrary we have observed a slight rise in rents in Milan.”
Meanwhile, the impact on commercial real estate is less clear. “Commercial real estate sector is not the stock market. It’s slower moving and the leasing fundamentals don’t swing wildly from day to day,” said a Cushman & Wakefield research report from last week — prior to Monday’s plunge, the worst in 11 years.
The Italian government has introduced a moratorium on mortgage and other debt payments during the emergency to help consumers and businesses cope. High debt loads may pose a major risk to real estate firms and other businesses in the event of a prolonged crisis.
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Italy has recently surpassed both South Korea and (officially) Iran to become the country with the most coronavirus cases outside of China.
In South Korea, where the outbreak also took a turn for the worse three weeks ago after dozens of members of a fringe religious group were diagnosed with the virus, real estate brokers have seen business dry up dramatically.
The country’s apartment market saw an average of just 458 deals per day nationwide in the first nine days of March, compared to 2,272 deals per day in December, local business outlet ChosunBiz reported Wednesday, citing government statistics. That comes out to a 80 percent decline in deal volume.
The decline has been even starker in the densely populated capital of Seoul, where daily deal volume has fallen by 90 percent from 309 deals per day to just 31.
“Business is frozen as more people are postponing moving plans because of the coronavirus, or are hesitant to show their homes to strangers out of fear of contagion,” real estate broker Mr. Park, whose office is in Seoul’s central Seongdong district, told ChosunBiz.
Across the river in the high-end Gangnam district, many brokerages have closed their doors. “Even the elderly folks in the neighborhood who would come by to chat have stopped coming,” an anonymous broker in the area said. The South Korean government’s December decision to ban mortgage lending for high-end apartments hasn’t helped business either, he added.
According to data from Korean rental startup Dabang, rents for one-room apartments in university areas in Seoul fell 2 to 9 percent last month compared to the month before, with landlords that cater to foreign exchange students having trouble finding tenants during what is usually a peak moving season.
It has also been a bad time to enter the real estate business in South Korea, as the required professional training programs for new brokers have been on hold for three weeks.
On the commercial front, 2019 had been a banner year for investment sales in Seoul, with transactions hitting a record high of 16 trillion won (about $13.5 billion), according to CBRE. The outlook for 2020 remains unclear.
The coronavirus outbreak in South Korea had showed signs of coming under control in recent days, but on Wednesday local health officials reported the country’s largest single-day increase in new cases — 242 — as well the discovery of a major cluster at a call center in Seoul.
Meanwhile, real estate players in the U.S. are largely in wait-and-see mode when it comes to the coronavirus’ impact. But New York’s housing market is already showing early signs of unease — while March is typically the busiest month of the year for Manhattan property listings, listing inventory has only grown 2.2 percent through the month’s first nine days.
“Potential sellers [have been] holding back since the beginning of the month of March,” Jonathan Miller of Miller Samuel said. “I believe the virus is the likely cause — there is a hesitancy to list at the moment.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
