The past year has been traumatizing for global economies owing to an out-of-the-blue Covid pandemic that engulfed the world, putting it in a hostage situation and triggering alarm bells in government corridors to tackle the health emergency. Extensive lockdowns, bleeding stocks and economic fallouts brought in fears of recession, with GDP growth numbers hovering in negative territory.
While countries across the world resorted to issuing quick financial stimuluses to resuscitate their economies, some amounting to trillions of dollars, the recovery of the economy and key markets depended on how fast Covid infections were controlled, how long restrictions were in place, and how well vaccine distributions have worked out.
Turkey and China were two countries in the G20 mix that rose in a Phoenix-like fashion from this crisis and were able to maintain a positive growth rate in 2020, something which has continued in 2021. While in Europe, Nordic countries bucked the Covid crisis quickly than the rest of the EU, owing to stricter norms, massive fiscal packages to support households and businesses along with the significant easing of monetary policies.
Stable Turkish economy leads to a buoyant real estate performance
The Turkish government’s decision to liberalize the economic and political institutions and establish a stable economy since the past two decades has brought rich dividends to the country, as the Covid pandemic could do little damage to the economy. The Turkish economy grew at a rate of 5.9% in the fourth quarter of 2020, while in 2021 it is maintaining a growth rate of 6.04%. Turkey being closer to Europe and having a reputation as a travel and tourism destination, attracts thousands of foreign investors from different parts of the world. Its real estate market has thus made a tremendous comeback from the brief lull during the peak of the pandemic, attaining the highest real estate growth rate in 2021 at 11%.
The Turkish real estate market held up strongly during the fag end of 2020 and came out all guns blazing with an investment spring in 2021 starting from March. Sales exceeded 100,000 units in March before falling slightly in April clocking 95, 863 residential transactions, a whopping 124% rise compared to April 2020. This trend was slightly disrupted in May 2021 due to a strict nationwide lockdown. However, home sales still saw a y-o-y rise of 16 with more than 59,000 transactions. However, this figure was doubled in June with more than 1,34,000 homes exchanging hands during the month. Stability in real estate investments and active vaccination of the population also added optimism to the real estate market, leading to an increase in foreign investors, despite travel restrictions.
About 4,748 homes were purchased by foreign investors in June 2021, a yearly rise of 185%. Istanbul, Ankara and Izmir collected the largest number of sales. Iraqis topped the list among the foreign buyers followed by Iranians, Russians, Afghans, and Germans. Sales to foreign buyers in January-June 2021 saw a 44% increase on year, with Istanbul taking the lion’s share. This momentum is expected rise significantly in the coming months due to factors such as the tourist season, lifting of restrictions, and revival of flights.
Strong economic growth signs prop up China’s realty market
China’s quick containment of the pandemic and swift rebound in consumption instilled confidence in investment circles and purchasing activity resumed at a brisk pace in H2 2020. The GDP recovery was led by a strong investment in real estate and infrastructure, spurring demand for industrial goods, while Covid related medical orders strengthened exports. These positive signs caught the interest of global institutional investors who started favoring the Chinese real estate sector, buoyed by the country’s ability to lead the world in terms of economic recovery.
Driven by strong pent-up demand for housing, residential property investment in China rose 29% on year to 2.06 trillion yuan during Q1 2021. Residential supply and demand volumes saw new high levels starting from March 2021. In March, the combined sales volume rose to 260.45 billion Yuan, while it was up by 8.9% in April with sales increasing to 296.53 billion Yuan. Policy stimulus, reduced mortgage rates, and lucrative discounts by realtors upped the residential sales graph. In June, real estate investment maintained the upward curve with 8.5% on year growth from 8.1% in May, buoyed by robust construction activity and easier credit. May and June data show that the real estate market in China will continue to heat up in the coming months, as consumer confidence rises with the complete vaccination of its population.
Nordic economic recovery on track; property consumers on a spending spree
While Turkey and China led the exploits in terms of global real estate growth, the performance of the Nordic countries in Europe post-pandemic, came as a surprise. The Scandinavians viz. Sweden, Norway, Denmark, Finland, and Iceland, weathered the Covid storm better than the rest of Europe, due to better containment of the pandemic fallout, a speedy vaccination rollout, and generous financial stimulus packages.
Residential property transactions in Nordic countries fell sharply in spring 2020, as the pandemic fueled economic uncertainty and lockdowns affected activities of banks, realty agents, and homebuyers. However, transaction activity recovered in the summer as consumer confidence in the economy improved and digital real estate sales took precedence. Flush with cash due to huge savings during the Covid outbreak and optimistic about their own economy, Nordic folks, splurged on property assets, as demand for larger homes and single-family homes surged. Low interest rates, mortgage payment holidays, and extensive fiscal stimulus helped households to cope better with their financial obligations and fuelled massive growth in housing sales which continued into the first half of 2021.
As a result, housing prices increased in the Nordic countries from the end of 2020, mostly in Norway, Sweden, and Denmark. Besides, the Nordic property markets continued to be attractive for international investors who invested EUR 4.6 billion in the region in H1 2021. Foreign property buyers are making a beeline to invest in the Nordic region as the economic conditions are stable than the rest of Europe. This phenomenon has resulted in groundbreaking transactions of EUR 29 billion in H1 2021, 75% higher than the same period last year. Sweden and Norway accounted for most of the transaction volumes, with its figures increasing by 101% and 171%, as compared to the previous year while Denmark saw its transaction volume increase by 45%.
The common factor that helped the real estate market in these countries stage a quick recovery and lead the global real estate charts, is consumer confidence in the respective economies and robust consumer buying power. Though most countries are in looming danger of a third covid wave, countries that have spurred their vaccination rate and paved the way for a quicker relaxation of containment measures will witness a steady recovery in housing markets. Recovery is expected to pick up pace in H2 2021 in countries like China, the Nordic region, Europe, and also India, due to approval of larger fiscal stimulus and faster pace of vaccination. That said, the projected global recovery of real estate markets will remain uneven.
