International scientific e-journal

ΛΌГOΣ. ONLINE

8 (April, 2020)

e-ISSN: 2663-4139
КВ №20521-13361Р

LAW

UDC 347.214.2

EOI 10.11232/2663-4139.08.16

CORONAVIRUS – ITS INFLUENCE ON REAL ESTATE MARKET

Yuliia KUKHARCHUK

Master of law, Junior associate

Avalon Inc.

 

UKRAINE


Abstract. We get used to live with new rules on the pandemic period. The most vulnerable is Ukrainian business. The real estate market is not exception. The article describes the main changes that developers are suffered of. It is being considered actual issues regarding the prices on real estate including the house rental. The article deals with comparative analysis of real estate changes in other countries. It allows to observe the positive developers progress during quarantine period around the world.

Keywords: real estate, house rental, pandemic influence, Civil code, economic crises.

Introduction. Real estate market has gradually emerged and developed in Ukraine. It is including certain system of market relationships: construction, transferring, operation. Considering the prominent importance of this sphere, it is necessary to mark that real estate market researching is very relevant and appropriate today.

As we know, epidemic COVID-19 has a negative impact on the world economy. The real estate market was stricken too. Therefore, it will be pertinent to indicate on all changes on quarantine period. Whether the real estate market is regulated at the legislative level in the “force majeure” case.

Analysis of the recent research and publications. The very thing to rely on Ukrainian legislation, as the issue regarding COVID-19 influence on real estate market is something new and not fully explored. Attention should pe paid on Civil code of Ukraine, Law on cancellation of rent № 3275, of the Cabinet of Ministers №211 with amendments. Also, should take notice on such experts as B. Hunter, L. Rowlinson, K. Sun, K. Barsukov. Each of them explored what losses the real estate market has suffered and told what awaits this area in the future.

The goal of research. To explore the changes and damages that real estate market faced with during the pandemic period, considering the problems that have arisen regarding the house rental. To make a comparative analysis of real estate development in other countries.

Results of research. The real estate market has undergone significant changes: all employees have gone online working, customers’ demands has decreased, communication with the client is almost totally online. All these changes have negative consequences: economic downturn, construction slowdown, etc. Due to such problems, there is no prices increase in real estate market. On the contrary, prices decreased. This is especially observed during the house rental. However, in this case, some gaps in the law can be noticed. Seeing that during such economic crises and “force majeure” there is no complete exemption from the lease payment due to financial difficulties. One way out is to reach an agreement with the landlord.

Positive dynamics of the real estate market during quarantine can be traced in some Europe countries. Despite all the obstacles, real estate foreign companies are developing rapidly. That is why Ukrainian developers should take international experience and try to move on their financial stabilization.

Necessarily to analyze all changes that real estate market faced with:

1) Work in online mode: all employees switch to "remote" work, arrange their work in a somewhat unusual format for them.

2) Reduced demand for the purchase of relevant real estate.

3) Work on the construction site does not stop (except of Chernivtsi city, where it is temporarily forbidden to perform repair and construction works). However, there is a right to inspect the territory occupied by construction works with the relevant local self-government bodies and the police, in accordance with the Decree of the Cabinet of Ministers No. 211 of 11.03.2011 with amendments; which stipulates the need to comply with all sanitary standards at the construction site and reduce the number of people at the construction site.[1]

4) Sales departments advise clients in "special mode" according to the appropriate schedule with enhanced sanitary standards, by appointment or online (telephone, Skype, e-mail, etc.)

In accordance with the established restrictions, there is a probability of the following consequences: slowdown in construction, reduced demand from the client and possible stagnation. For example, a coronavirus epidemic in China has led to a decline in real estate buying activity. The number of transactions decreased approximately by 15%.

Based on the above, it is necessary to "install an airbag" and take appropriate measures that will substantially help minimize economic losses. It is important to focus on the construction of residential complexes that have been started and not to change the dynamics of construction. It is necessary to clearly plan all stages of work, to adhere to the established schedule, in order to reach the previously set deadlines.

Considering all information, the question is rising real estate prices. According to analysts, quarantine has no effect on reducing or rising real estate prices. But in this case, the buyer will be more freakish and look for a builder that meets the following criteria: reliability, high quality, pace of work and favorable conditions. Thus, builders with a good reputation and quality list of projects, after the quarantine, will be able to resume their operation much faster in the usual mode, as clients will be ready, even, to overpay for the object of construction.

However, it should be noted that the probability of resuming the full work of developers depends not only on the end of quarantine, but also on such factors as: the ability of banks to serve customers, the exchange rate, the restoration of client’s demand, etc.

The changes in the pricing policy are followed when you would like to rent this real estate during quarantine. In accordance with art. 810 of the Civil Code of Ukraine, the landlord (homeowner) transfers or undertakes to transfer the rented dwelling to the tenant for a fixed term and for a fee. They conclude a lease agreement. [2]

In Ukraine, and especially in the capital, there are many people who rent houses - these are students, employees, etc. Most tenants return home during the pandemic period, and therefore the demand for house rental decreases. However, there are some who remain. In such a crisis, there is no legislative fixation, for example, the possibility of being released from paying rent due to financial difficulties.

In some European countries during the pandemic period, it is impossible to evict a person due to some financial difficulties, which are also caused by insurmountable circumstances. Such opportunity is not provided in Ukraine. There is only a possibility of negotiating to reach a common consensus with your landlord.

In this case, we can only rely on art. 762 of the Civil Code of Ukraine which implies that the tenant has the right to demand a reduction of the payment if, due to circumstances for which he is not responsible, the possibility of using the property has significantly decreased. The tenant shall be exempt from payment for any time during which the property could not be used by him because of circumstances beyond his control. This can be a good argument for pay reducing. [2]

It will be appropriate to indicate what changes in the real estate market other countries have faced with and whether they are like Ukraine changes.

The bars, restaurants, hotels, entertainment complexes are the most affected today in USA real estate. The next is retail, housing (second-type homes and luxury apartments). Developers need suppliers, but due to the introduction of curfew and slowing down the business, the delivery processes are slowed down. [3]

Evidence suggests that the spread of the pandemic has affected real estate market in Italy. Thus, the sale of real estate decreased by 7% compared to last year. There is no price pressure, and there is even a slight increase in rent in Milan. [4]

In Spain, physical property viewings are not permitted until the current state of emergency ends. In France, the situation is similar until the 15-day lockdown finishes. The sale of real estate is slowing down, as notaries recommend signing and certifying all documents after quarantine period, except in limited "urgent" cases. It is noted here that in any case, real estate investment is a reliable "wallet" for savings and a good investment in the future. [5]

Some Russian companies have transferred office workers to remote work. As we see the same situation in Ukraine. An employee may work separately only with the consent of the employer, who must prepare the relevant order. In the current conditions, when forecasting the situation on the real estate market, many factors should be considered, including oil prices and possible additional government support measures for those who have problems. Analysts at the National Credit Ratings Agency previously predicted that prices for new buildings in Russia could fall by 20-30%. [6]

Conclusions. Any business will suffer from adverse economic consequences in such hard situation. However, given the international indicators of the real estate market development of some European countries, I would like to point out that with correct, balanced and consistent actions, it is possible at least to try to ensure a "almost painless way out " and move towards on business activity stabilization. It is necessary to minimize economic losses. Several laws will also be needed to protect the real estate sector in Ukraine and in terms of house rental. It will give confidence for the further real estate development and will give people the opportunity to regulate their relations with the landlords.


REFERENCES:

 

  • Amendments to the Cabinet of Ministers resolution (Cabinet of Ministers resolution). No. 211 (2020). Removed from: https://www.kmu.gov.ua/npas/pro-vnesennya-zmin-do-postanovi-kabinetu-ministriv-ukrm020420ayini-vid-11-bereznya-2020-r-211

  • The Civil Code of Ukraine (Verdicts of the Verkhovna Rada of Ukraine (VVR). №№ 40-44 (2003). Removed from: https://zakon.rada.gov.ua/laws/show/435-15

  • Hunter B. (2020). Coronavirus’ Impacts On Real Estate: Why You Need To Think Short-Term And Longer-Term. Forbs. Removed from: https://www.forbes.com/sites/bradhunter/2020/03/24/coronavirus-impacts-on-real-estate--why-you-need-to-think-short-term-and-longer-term/#6a135efb5f6f 

  • Sun K. (2020). Real estate was booming in Milan and Seoul. Then came coronavirus. The Real Deal. Removed from: https://therealdeal.com/2020/03/12/real-estate-was-booming-in-milan-and-seoul-then-came-coronavirus/

  • Rowlinson L. (2020). Covid-19: what it means for your property deal. The Financial Times. Removed from: https://www.ft.com/content/a8bba3ae-6a07-11ea-a6ac-9122541af204

  • Barsukov K. (2020). What will happen to the coronavirus real estate market? EurAsia Daily. Removed from: https://eadaily.com/ru/news/2020/04/07/chto-budet-s-rynkom-nedvizhimosti-pri-koronaviruse-rasskazal-ekspert


КОРОНАВІРУС – ЙОГО ВПЛИВ НА РИНОК НЕРУХОМОСТІ

КУХАРЧУК Юлія,
Магістр права, Молодший юрист
Авалон Інк.
УКРАЇНА

Анотація.
Під час пандемії ми звикаємо жити за новими правилами. Найбільш уразливим на сьогодні залишається бізнес в Україні. Сфера нерухомості не є винятком. У статті описуються основні зміни, які зазнала сфера нерухомості. Розглянуто питання щодо підвищення цін на нерухомість, зокрема в частині житлової оренди. Проаналізовано зміни на ринку нерухомості, з якими зіткнулися інші країни. Відповідний аналіз дає змогу спостерігати позитивний прогрес розвитку ринку нерухомості під час карантину у всьому світ.


Ключові слова: нерухомість, оренда житла, вплив пандемії, Цивільний кодекс, економічна криза.

© Кухарчук Ю., 2020

© Kukharchuk Yu., 2020

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

PUBLISHED : 23.04.2020