Impact of the Covid-19 pandemic on the real estate market in the Alps
The Covid-19 pandemic is most likely to have a significant impact on the global economy. World GDP fell to 5% in 2020. The unique nature of the crisis means that the recovery degree is still largely unknown, but has potential long-term consequences for our daily lives. To get an idea of what Covid-19 can mean for the real estate market in the Alps, we turn back to the development during the global financial crisis and examine how they differ.
One of the main contrasts between the Covid-19 crisis and the global financial crisis is that owners are generally less indebted now than before the global financial crisis. Therefore, it is likely that there will be a lower number of forced sales of real estate. Generally speaking, between 2000 and 2008, only 40% of buyers did not use a loan to finance the real estate purchase. For comparison, from 2010 to 2014 it was more than 80%. For purchases from 2015-2020, this share fell again to 50%, as loans became significantly more affordable and cheaper.
As a result, we expect the number of property owners who will have to sell their property in the Alps to be lower than ten years ago. This will maintain the price level and will not lead to a significant drop in current prices.
The Covid-19 pandemic disrupted travel around the world. This is likely to help resorts that are largely driven by domestic demand. From this perspective, France, with only 27% and Italy with 35% of tourists from foreign countries, are the best locations. By contrast, Austria is at risk with 66% of foreign skiers visiting. However, if the borders are not closed, Austria is the closest alpine skiing area for German, Dutch, Czech, Slovak or Polish skiers. Tourists will look for stays in nature, so the mountains are an ideal choice. Therefore, if the borders are not closed, skiers from the surrounding countries will also find their way to Austria.
By the end of 2020, the volume of transactions in the Alpine markets is likely to decrease. We assume that property owners will hold their property and only in the most serious cases will they be forced to sell it now. A different situation may arise in the case of the second wave of a pandemic, for which it is historically proven that the economic impact on individuals is more pronounced.