The situation generated by the COVID-19 has undoubtedly put the world in check, paralyzing much of the global economy and generating some uncertainty about what will come next. Starting with the increase in unemployment, many sectors have been affected by this situation, including the real estate sector.

After more than two months in which part of the activity has been paralyzed, we are beginning to emerge from the crisis step by step and return to what many have called the "new normality", but what is in store for us in the coming months in the real estate market? How will this situation affect us? Below we set out the possible scenario we will face this year and next.

The current situation

Paralysis of demand

The demand in the Canary Islands real estate market had already been decreasing since last year and, before the arrival of the coronavirus, the price of housing in the Archipelago had risen by 1.8%. A slowdown in the market that has been exacerbated by the pandemic.

And the main manifestation that the crisis has had in this sector is the fall in the interest in the purchase of houses: in these months, the volume of potential buyers who contact interested in some houses has fallen considerably.

Changes in prices

Beyond the decrease in buyer interest, it is important to analyze the fluctuations in housing prices in Tenerife after the COVID-19. According to sector data, in April 2020 the average price of a 90 m2 flat was 2,102 euros per square meter, that is, around 189,180 euros. Likewise, that of a 150 m2 single-family home was 1,792 euros per square meter, that is, around 268,800 euros.

The situation for the coming months

With a clear idea of where we are now, how do we think the real estate market will behave in the future in short and medium term? Undoubtedly, taking into account the collapse of employment and the paralysis of activities that will still persist for some time, the forecasts point to a downward trend in prices. By August 2020, it is estimated that the average price of a flat will be 1,822 euros/m2 -about 164,036 euros-, and the average price of a single-family home will be 1,606 euros/m2 -about 241,045 euros-. By February 2021, the price of housing could reach its lowest price: 151,176 Euros for flats and 220,491 Euros for single-family homes.

This situation can be maintained until April 2021, when it is expected that, with the beginning of the employment recovery, the real estate market will also start to recover with a slight increase in prices. This recovery, of course, will not be immediate, but will take place progressively until April 2022, when housing is likely to reach the value it had in April 2020.

It is also important to mention the tourist rental sector, in which there have been significant changes in recent months, since as a result of the confinement of the population, holiday rentals have fallen, and owners have had to seek alternatives to dispose of their unoccupied homes. The first alternative in these cases has been to opt for traditional residential rentals, which has led to an increase in the supply of long-term rental housing. However, it is important to bear in mind that, between November and December 2020, a large part of the hotel and tourist activity on the Islands will be reactivated, so these changes will also affect holiday rentals.

Undoubtedly, months of certain uncertainty are coming in which the behaviour of the sector will depend on how the situation of the virus evolves and on the measures of social distancing that need to be maintained. In any case, whether you are an owner or interested in buying/renting a property in the short to medium term, we recommend that you consult with professionals who are able to advise you on the best decision to make. At Proyectos Insulares we have a team that will be happy to answer your questions, so don't hesitate to contact us and follow us on our social networks to keep up to date with the latest developments in the Tenerife real estate sector!