Thank you, but no need in this... Pandemic is changing the global real estate market

Americans are facing an eviction crisis because people have nothing to pay for housing. In Europe, people move from the metropolises to the suburbs.

Yelena Ivanova

The fact that residents are leaving San Francisco has been talked about for a long time. The network real estate agency released new statistics this week. From the semi-annual report on the development of the real estate market in the capital of Silicon Valley, everyone was amazed. In the company, the number of homes for sale increased by 96 percent from February to July. No other American city has such a large number of empty houses.

The fact that the pandemic will certainly affect the American real estate market is predicted from the first day of quarantine. But in San Francisco, several factors converged, which led the situation to the exodus of residents.

House prices in Northern California have been astronomical in the last 10 years since the second technology boom began. The market was expected to collapse at some point. The coronavirus was the very last straw. With the outbreak of the pandemic, it quickly became clear to tech giants like Google, Facebook and Twitter that they needed to rethink their workflows. Many have allowed employees to work from home. With the end of the quarantine, the "deletion" did not end. Maybe this will always work now. Entertainment, restaurants and bars in the city also closed, and all this prompted residents, most of whom worked for Internet concerns, to leave San Francisco. People are leaving small and very expensive apartments and houses for (relatively) cheap California cities like Lake Tahoe or Palm Springs, where there is more housing and greener lawns. Remote work explains the movement in the housing market, but San Jose also has many Internet headquarters, but people don't leave in batches. There are significantly fewer homes for sale in San Francisco than in other American cities. Relative to the entire housing stock, its percentage is a quarter of that of New York. But even this cannot explain such a situation in the market.

The pandemic has exacerbated a housing problem in America that was not born yesterday. One in four tenants spends more than half of their salary on rent. Young people do not have a single chance to buy their own homes, writes NYT. A million people are evicted from their homes every year, half a million remain homeless. At the beginning of the epidemic, experts feared that the problem with evictions would worsen. But this did not happen, because the government paid additional citizens $ 600 a week during quarantine, and local authorities in large cities announced a moratorium on evictions. But payments stopped at the beginning of August, and the situation is starting to develop in a worse direction. Some experts say between 30 and 40 million people face eviction. But even if their number is 2-3 million, this in any case means a worsening of the current situation by two or three times.

Housing in the United States is a mixture of federal, state and local laws. It is influenced by banks and developers. When a housing crisis hits, it is difficult to strategize correctly. There is no "chief" who would be responsible for the safety of citizens' housing. If low-paid tenants or immigrants cannot pay their rent, homeowners are forced to sell them to large companies. Over the past 10 years, millions of apartments have left the cheap housing market. Some of the houses were demolished, but the vast majority were converted into higher class housing, not accessible to poor people.

During a pandemic, cities lose their attractiveness around the world. Metropolises have been a magnet for people in the era of globalization. People moved to big cities, increased labor productivity, and strengthened the economy. Lifestyles mixed, consumption patterns unified. Globalization took place in big cities. The big question is what will remain of it in the era of covid.

A large crowd of people becomes, from the moment of attraction, a threat to life overnight. Until there is a vaccine, and the disease dies down, then flares up with renewed vigor, cities turn into dangerous places. The virus threatens not only people, but entire cities. The eventful and cultural life disappears, leaving cramped apartments and large rent and utility bills. The masked social distance and the constant fear of getting sick supplant the usual lightness of being. After the end of the quarantine, there are more people on the streets, but people stop using public transport and again stand in traffic jams in their cars. If people stop going to work, and only occasionally have to come to the office, they begin to consider housing options farther from the city than before.

In Europe, people leave small apartments in the city or even a room in a communal apartment and move to the suburbs. This is how economic geography is changing. Cities are losing, to some extent, their importance, the suburbs are acquiring it, and the province is left far behind the board of progress. Scientists believe that the winners in this competition will be medium-sized cities within a hundred kilometers of metropolitan areas. More remote areas will continue their depressive existence further. This development will have consequences for the economy, society and politics.

Historically, the phases of the flourishing of cities were replaced by phases of their withering or complete disappearance. In ancient times, about a million people lived in Rome until climate change and pandemics from the second century AD heralded the decline of the empire. In Europe, for several centuries in a row, cities have shrunk, which has caused centuries of economic stagnation. During the Industrial Revolution, cities flourished again, millions of people abandoned their villages and moved to cities. The modern metropolis has become not only a place from which government or the representation of power is exercised, it is also a place of production and innovation. The city became a place where the spirit was born, it turned into a generator of something new and innovative for the whole society. Urban growth is a reversible process. In the 70s and 80s of the last century, large cities, former industrial centers, like the cities of the Ruhr region in Germany, lost their importance. People began to leave them. Those who could afford it settled on the outskirts. Living in the suburbs has become a trend in Western society.

Only the transition to globalization and the "knowledge society" gave cities a new look. With the support of politics and the state, new centers of congestion were created to create a critical mass of technology, culture and entertainment in them. Cities became places where capital, culture and internal and external migrants met. The economist Richard Florida described the phenomenon as "talent, technology and tolerance".

So far in the German metropolises, house prices are rising, but the growth rate, according to the Bureau of Statistics, has slowed down compared to the growth rate in the country as a whole. In villages, the increase is even smaller. On the other hand, houses and apartments in medium-sized cities around the metropolises are growing the most in price.

What will happen?

The cities will become quieter, there will be fewer people and tourists.

While real estate prices are rising. Economists at the Swiss bank Safra Saracen believe that prices in Germany will rise, because there are no other instruments for investing money other than buying real estate in times of super-low bank interest rates.

Urban creativity will diminish. Super digital work culture doesn't support it.

The contradictions between the city with the suburbs and the countryside will become even more acute.

The outflow of population from the province will increase. This will lead to new uprisings against the elite, which means against the cities. This was shown by Brexit, the movement of yellow vests in France, the presence of the German party "Alternative for Germany". Culturological, ideological conflicts will only worsen.

New residents in the suburbs will support small and medium-sized enterprises that have always been close to large cities.

Whether people will live better or happier - this question remains open.