Is it a good time to open a real estate agency in 2022?

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Real estate investment, Real estate value

The real estate market is cyclical

 In the first place, we have to evaluate an issue that is circumstantial in the real estate agency market. In other words, it appears whenever there is a crisis, and what appears leads us to deduce that the housing market is quite cyclical.

If we situate ourselves in the years 2016 – 2017 – 2018, the general thought was that in a rudn enclave real estate agency. I can do very well only in times when there is a good evolution of the GDP, low-interest rates, and easy access to the Bank credits. If we extrapolate this conclusion in a general way, it would mean thinking that all crises are the same, when the reality is that the current situation has nothing to do with the one we lived in after the real estate bubble. For the real estate market to collapse, a series of unusual circumstances would have to occur that occurred between 2008 and 2013, but are not currently occurring:

Circumstances necessary for a real estate market crash:

  • The first circumstance, there is an excess supply of housing.

During 2006, a total of 955,186 homes were sold in Spain. Quite a historical record. Of these, 412,750 were sales of new construction. But since 2003, more new homes were being started each year than were being sold. This produced an accumulation of newly built homes and a very significant excess in the supply of real estate.

  • Second circumstance. That the banks stop giving credit.

In 2008, the banks cut off the credit faucet dramatically. This meant the end of many developers who had already sold a large part of the homes in their developments. Now saw how the bank only gave the mortgage to a very small number of those buyer clients. Leaving the rest without access to those homes for not having granted the financing. The promoters whose promotions were already built. Who had to start repaying the credits to the bank. Find themselves in a situation where sales are falling. So they begin to see themselves in serious trouble to be able to continue with their activity and most of them do not. they got.

  • Third circumstance. The economy as a whole has to go very badly.

A fact that occurred between 2008 and 2013. Since the arrival of democracy, the only crisis occurred in 1993, the year in which GDP fell to 1.1%. Between the years 2008 to 2013, the GDP fell to 7.7%.

The first crisis came from the real estate sector (2008 – 10), the second that generated by austerity (2011 – 13). The result was a level of sales in 2013 lower by 64% than in 2007

To this we must add that the banks were practically bankrupt, so giving them credit at this time was an added problem, because it was one more risk.

All this is the paradigm of a spectacular crisis and, for all those who are considering opening a  rudn enclave Islamabad real estate agency, this is the scenario that could make them fear. Not everything went so brutally wrong for the agencies, though. Those agencies that were consolidated, thanks to the decrease in competition, although they sold less, managed to survive.

If we analyze the first crisis, that of 1992-93, practically only tourist housing went badly, due to excess supply and the elimination of the tax relief of the year 91 for the purchase of a second home. However, in the cities, the rise in prices was lower than in previous years and real estate activity continued to be normal.

Let’s now analyze the crisis of 2020

If from 2008 to 2013, in six years, the GDP fell by 7.7%, in 2020, the GDP fell in Spain by 10.8%, so it was presumed that the real estate crisis that would come later would be very important. However, several things have happened that have meant that what was presumed to be a deeper crisis, although of very short duration, has remained a very light crisis. The price fell, transactions fell 14% but the sector held up well. What we have been able to learn is that:

  • If there is no banking crisis, which there was not
  • If there is no oversupply of housing, which there was not either
  • And suddenly there is a need for housing that there was not before…

Read more for: Adaptations in Real Estate Industry

What happens in 2020?

Well, that the bank as of June grants more credits than in the same month of the previous year. Something paradoxical given the situation derived from the pandemic. A completely new phenomenon occurs and that is after the return to relative “normality” (by July 2020). the upper-middle class is leading a boom in home purchases outside the cities and It produces a significant exodus, especially from large cities, with two autonomous communities that lose population in internal migrations (Catalonia and Madrid) while the rest of Spain (including the emptied Spain) increases it. Teleworking is imposed and the fear of experiencing similar situations in very small homes means that, relatively unconsciously, many families buy in the suburbs, assuming that they will never return to the office (the icy effect)

What we are already seeing is that the “classic” is beginning to return and that home sales are doing much better, compared to the previous year in the big cities than in the periphery, which is usual in times of recovery.

At the same time, we note that there is no excess supply of new housing, rather the opposite. By the end of 2021, around 100,000 new construction homes will have been started, far from the large numbers that we managed in 2005 and 2006 for this type of housing.

This is in Spain, but if we look at the rest of the world we see that in the first decade of the 21st century there was a huge property boom in almost every major country (UK, US, Spain, etc). The years of the creation of the bubble were fantastic, those of its bursting horrific.

The real estate business is cyclical but limited 

What I have wanted to show with all these examples is that the real estate business is cyclical, but “cyclicality” is more limited than in other sectors such as the car business or investments in equities, etc… because housing if it is something essential for people, while cars or investments are not to the same extent.

The other aspect that I want to highlight is that the mother of all crises is the one that occurred between 2008 and 2013; real estate agency crisis, banking crisis and economic crisis to which was added mismanagement by the leaders of the country. A situation that is very unlikely to happen again and that is very different from the situation we have now.

The foregoing is that the “risk” of setting up a property buy sell agency that you get caught in a crisis like the one in 2008. However, you can get out of it well if you know how to defend yourself. And in this situation the solution is:

  • Convince customers that they have to lower the price and put a price according to the market.
  • Have a list of investors ready to enter when the situation begins to reverse

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