Residential Developers and COVID-19

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Residential Developers and COVID-19

Given the conflicting market data regarding the pandemic’s impact on residential developers’ ability to carry out their previously established plans, PMR decided in the second half of September 2020 to conduct a dedicated survey. Nearly 100 representatives of real estate development companies participated in the survey. What are the key findings from the responses?

More than a quarter of those surveyed have not yet noticed the pandemic’s impact on the real estate development market

A significant percentage of real estate development companies have not yet noticed the impact of the coronavirus on the primary housing market. About 27% of representatives from the surveyed group of companies believe that the real estate development market has not changed. The remaining respondents noticed such a change but differed in their assessments of the extent of this impact. The vast majority assume that the market will return to pre-pandemic levels. About 7% of respondents stated that this recovery has already taken place. Nearly one in four respondents expressed the opinion that this will happen relatively quickly—within a year. Only 2% of respondents believe that the market will never return to its previous levels and that COVID-19 has permanently disrupted its potential.

What suggests that, sooner or later, the real estate development market will return to its previous levels?

Among the residential developers surveyed, the range of factors supporting a return to the previous state is quite broad. Several dozen such factors were mentioned. The most frequently cited include:

changes in bank lending terms (14% of responses),
a return to normal (one in ten companies).

Behind this first factor lies the developers’ belief that, after the initial shock, banks will develop new methods for assessing risk that will not unduly curb lending.

The second factor is the belief that, as the weeks and months go by, consumers, institutions, and companies themselves will learn to live and function effectively under the new conditions. For 7% of respondents, the situation was already returning to normal at the time of the survey, so the real estate development market’s return to its previous level was merely a matter of time.

Since most real estate development companies recognize the impact of COVID-19 on the housing market, how is this situation affecting their day-to-day operations?

Among residential developers who recognized the constraints resulting from the pandemic, two types of measures taken to adapt to the new situation were by far the most commonly cited. More than half of the companies decided to extend the deadlines for ongoing construction projects and/or delay the start of new projects. A less common approach was to put new projects and/or land acquisition processes on hold (in both cases, less than one in three surveyed companies chose this option).

It is worth noting that only one in ten respondents from the surveyed group indicated that they had completely abandoned plans to launch a new project. The results therefore indicate that even among real estate development companies experiencing a direct impact of the pandemic on their business, this impact is largely limited, and its effects are reversible.

How significant will the delays in the completion of ongoing real estate development projects and the launch of new ones be as a result of COVID-19?

Since we already know that among real estate development companies that have recognized the pandemic’s impact on the real estate market, the most common adaptive measures are extending the completion deadlines for current projects and delaying the launch of new developments, it is worth examining the scale of these delays. Is it a matter of weeks, months, or perhaps even years? We also asked our respondents this question.

	By how many months was the project timeline extended?	By how many months was the launch of the new project delayed?
1–2 months	8%	15%
3–4 months	58%	30%
5–6 months	31%	45%
more than 6 months	4%	10%

Note: Only developers who had taken such adaptive measures responded to this question.
Source: PMR survey of a sample of approximately 100 residential developers, September 2020

According to the respondents’ answers, delays related to COVID-19 most often fall within the range of 3 to 6 months. This is precisely the timeframe indicated by nearly 90% of respondents whose companies decided to extend the timeline for ongoing projects. Three-quarters of the surveyed companies that postponed the previously planned start of a new project also indicated the same timeframe.

Summary of the Survey of Real Estate Development Companies

The results of a survey conducted by PMR among residential developers inspire moderate optimism. Although a large proportion of these companies have observed a direct impact of the pandemic on their business operations, they generally view these changes as reversible within a relatively short period of time. Any necessary adjustments are more likely to result in delays of a few months rather than the abandonment or indefinite postponement of previous plans.

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