Almost every person in real-estate market is asking this question periodically or when some new parameter comes on the table. Basically, most people are tenants in rented properties at least at some stage in their life, so rent prices direction is crucial all the time. Fundamentally, the price of rent will be determined based on demand and supply within the market where they inversely proportion to each other.
Currently, with all pandemic effects and its economical waves which are causing a recession most analysts say it might be the biggest and longest one to face since 1920s. On the other hand, some countries with strong budgets have mild effects that varies depending on many variables.
Now, the one trillion dollar question that is tangible to normal people daily life… “Is the rent going down or up?”… we will show our viewpoint which is limited and not global where you can have it as a thought to answer that question based on your area or region…
Rent Prices will Go Down because of:
- Mass job cuts in all sectors (even technology)
- Salary & Benefits cuts for majority of employees..
- Low spending behavior imposed by pandemic uncertainty
- Tenants tend to go for cheaper and smaller properties
- High market supply of units/properties with limited demand
- Businesses are going online without offices or shops and going to virtual offices, e-shops
- Most Workers are unable to return to the country/state they work at
- Investment is very limited in realestate
- Realestate market is saturated by developers, agencies, brokers, so the benefits are low and competition is high
Do you think it will go up sooner or later?
Realestate market will get better soon in terms of supply and demand, but will never reach to its value before the pandemic where we think the pandemic applies a very strict corrections to prices and properties values and whatever you see right now from many agencies “special offer” “discount prices” is just a try to avoid the up coming new low prices or what we prefer to call “corrected values vs. prices”
What if you are wrong?
If we were wrong in our thought which is possible, the rent prices goes higher than the period before pandemic as owners/developers/agencies wish; then another crisis will definitely occur because of the difference between the tenants financial ability versus the demand prices which will lead to a very awful financial crisis besides pandemic rescission… In another expression, the wheel will stop!
What if the country has a huge global event or government bails out the market?
This will reduce the side effect little bit and may speed-up the recovery based on the money pumped after the pandemic to the local market fairly to the middle class people who are now in a very tight financial situation. Also, put in mind a huge event or treasury money will just be like a temporary pain-killer but not the cure like what happened in 2008 crisis and the bounce back is going to be extremely harsh on the market…