Mike and Christine, a couple from the English Midlands, had agreed the sale and paid the deposit on a beautiful villa in Vence, between Nice and Cannes. They had even bought a car to drive in France.
The day after they signed the contract, however, all over-70s were told to self-isolate at home by the UK government to minimise their risk of catching Covid-19. The couple — who did not want to give their real names — got cold feet and pulled out of the deal.
Like those of many people, Mike and Christine’s plans for buying a second home in warmer climes were thwarted by coronavirus, which has led to travel restrictions and lockdowns all over the world — and brought international property transactions to a halt.
The couple say they are now taking time to reassess their options. It is not necessarily a bad thing that they pulled out of the deal: with the pound regaining some strength against the euro since the middle of March, by mid-April the property would have been £87,000 cheaper, thanks to the exchange rate.
“I am still confident we will get this one over the line, when the time’s right,” says their broker, Serge Cowan, founder of the Unique Living Network, which sells luxury property around the world.
Judging when might be the right time to invest in an overseas property is difficult. With airline fleets grounded globally and countries imposing — or considering imposing — extended quarantine periods for travellers, what will happen to the international holiday-home market this year? Will 2020 see deals dry up — or is now the time to buy a beautiful Tuscan villa at a bargain price?
Closed borders and travel bans have meant that the number of flights operating are well below usual volumes. As of the beginning of June, some European countries were recording a decline in traffic of more than 90 per cent, according to OAG, a consultancy tracking flights around the world.
This is beginning to change, however. Some budget airlines, such as Ryanair and easyJet, are expected to resume flights this month or next — albeit at a significantly reduced capacity. British Airways is planning to restart a large number of flights in July. Air France is aiming for a gradual increase from this month.
With the possibility of special no-quarantine agreements — so called “travel corridors” between the UK and certain Mediterranean resorts — this may be the saving grace for investors who, in the past few months, have seen property bookings “fall off the cliff”, according to Robert Green, founder of Sphere Estates, which sells and rents luxury homes.
A four-bedroom villa in Saint-Paul-de-Vence, south of France, €1.75m through Unique Living
“The first half of this year is probably a write-off,” he says. It will take months before normality returns, especially if UK holidaymakers will be put off by the prospect of spending two weeks in quarantine when they return — as current government policy dictates.
Short-term rental landlords will see reduced yields this year, as hosts struggle to fill their homes. “For two months we had zero reservations and zero revenue, and all our apartments stood empty,” says Adriano Frigoli, founder of Nativo, a company that manages high-end Airbnb properties mostly in Milan and Madrid.
Since mid-May bookings have started again and in Milan, where the outbreak hit earlier than in Madrid, they are at 80 per cent occupancy. “But the revenue is totally different, at 50-60 per cent of what it used to be,” he says.
Three or four-bedroom branded penthouse, Andermatt, Swiss Alps, from SFr7.16m (£5.95m) through Sphere Estates
Airbnb has announced it will be scaling back its high-end short-break service, Airbnb Luxe, as the company — which is to make a quarter of its workforce redundant — adjusts to economic slowdown in response to the outbreak-related slowdown.
“We probably won’t know the full picture [for occupancy rates] until the end of August,” says Green. “But some hotel industry experts do not expect a full recovery until at least 2023.”
Eight-bedroom, 11th-century chateau, Languedoc-Roussillon, France, €3.2m through Sphere Estates
For buyers, viewing potential holiday homes has become almost impossible, as even private-jet travel depends on reopening borders. Despite some initial excitement from estate agents, only a few wealthy people have been willing to buy based on virtual viewings or live walk-throughs.
“We have managed to agree a small number of sales in this period, predominantly with clients who viewed before the lockdown,” says Tim Swannie, director of buying agent Home Hunts.
Despite the difficulty in visiting and buying during lockdown, potential buyers have still been searching for holiday homes. While a lot of this might be put down to idle scrolling, some agents believe it is a sign of pent-up demand.
Swannie says that compared with the same period last year, inquiries at Home Hunts were down only about 12-15 per cent during lockdown, “which we have found quite encouraging. Over the past 10 days, inquiries [in France] have increased quite dramatically, particularly from UK and European buyers,” he adds. “It feels like it is going to be a busy summer.”
Five-bedroom villa near Florence, Tuscany, €2.5m through Savills
Miles, who did not want to give his real name, is among those expected to seal the deal in the next couple of months. He intends to purchase a three-bedroom villa at the Soneva Jani resort in the Maldives. The villa sits directly on the water on stilts and decking. Miles had been searching for the right property in the Maldives ever since he and his partner took a trip there several years ago.
“It ticks all our boxes,” he says, adding that he is hoping to earn money by renting it out as a short-term let when not using it. He is now consulting tax advisers and hoping to finalise the purchase in July. He believes he can buy the villa for $6m, reduced from a guide price of $6.5m.
Three-bedroom villa at Soneva Jani resort, Maldives, $6.5m through Sphere Estates
Green expects that transactions will surge once the restrictions are lifted and people are free to move around again, and then stabilise. He says many potential buyers now inquire about fast internet connection, private outdoor space and extra room for incorporating a home office.
Portugal’s Algarve, the south of France and the Alps have been the destinations with the most interest, as they are easily accessible by car from the UK or elsewhere in Europe.
“People want to be able to run business from there,” he says, adding that second-home buyers are starting to think about using the properties for longer periods. “I do see people working from different parts of Europe especially. They own five or six homes and work from wherever,” he adds.
Risk or opportunity?
Chris, a British entrepreneur based in Japan, is looking for a holiday home in Europe, either Tuscany or Puglia in Italy, or Bordeaux or Montpelier in France.
“Property prices in Tokyo and Shanghai are crazy and land comes at a premium. In order to own a nice place with a big veranda, I need to be very wealthy indeed,” says Chris, who did not want to give his surname.
“I have been looking for a while, but then I thought the timing might be good from both an altruistic and self-centred perspective: it is a good time for money to be going back to the economy and hoping people will be motivated to sell,” he says. From his research, he thinks that prices where he is looking are down about 10-15 per cent on where they were pre-Covid, and more sellers are willing to negotiate the price.
“Spending money is good for everyone. I’ve set aside money for a couple of years to make a purchase and now feels like the right time to move. Whenever there is a crisis, there is a risk and the opportunity at the same time,” he says.
Three-bedroom villa, Algarve, Portugal, €1.45m through Unique Living
Some agents believe that discounts could become common for mid-market homes — especially those in harder-to-reach places such as the Maldives, the Seychelles and the Caribbean. Around the world, Green estimates that older, resale properties and those in non-prime locations or with restricted views could have their prices cut by up to 30 per cent.
“Now is the good time to start negotiating, even before everything opens up, because you’ve got that uncertainty in the market,” he says. “There are definitely deals to be had and sellers realise they need to be flexible, especially until markets fully reopen and buyers can travel freely again.”
A six-bedroom villa with guest house, Châteauneuf-de-Grasse, near Cannes, €9.975m through Savills
Agents say that homes at the top of the market are unlikely to be reduced by much. “The absolute best is so rarely available that we will find buyers,” says Anthony Lassman, founder of Nota Bene Global, a luxury travel and real-estate business. He thinks luxury will also be the first market to bounce back once restrictions lift and quarantine is not required.
“With interest rates low, affordability to hold a property has never been stronger,” says Hugo Thistlethwayte, head of global residential operations at Savills. He adds that demand has already picked up for “I want it now” sales, as people are emerging from lockdown and want to spend the summer in their newly purchased homes.
Thistlethwayte has noticed the reversal of a trend prevalent in recent years, where younger buyers have preferred smaller city apartments over larger, detached villas — a movement likely propelled by the ease of renting out homes on Airbnb. Now the demand is for farmhouses in Provence and Tuscan villas.
The future is local?
As borders have closed, domestic buyers have replaced overseas buyers, says Thistlethwayte. Developers are also trying to adapt to the new situation by building residences for the post-pandemic world.
One luxury developer in Cyprus — who did not want to be named — has overhauled its master plan for a five-star development from high-rise, high-density towers with an adjoining hotel to a villas-only project. It might even incorporate an organic farm, making it almost self-sufficient.
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Green, who advises the developer, said that the shift to “Covid-compliant” is the new modus operandi in the business. Minimising cross-section pathways, installing air-circulation systems and using materials on which bacteria and viruses cannot survive for long are among the features that the industry is now focusing on.
“But hopefully this will pass and won’t become something that we’ll have to live with,” he says.
Ultimately, the second-home market will depend on when and whether consumers feel confident about flying again, says Kate Everett-Allen of Knight Frank, on when people will feel comfortable to get on a plane again. She does not expect a repeat of the financial crisis of 2008, which saw widespread distressed selling in many parts of the world, but thinks buyers will sit on their hands for a while to see what happens.
Holiday homes available to buy now
Beach villa, Corfu, Greece, €800,000
A four-bedroom villa overlooking a beach on the south-west coast of Corfu, about 40 minutes’ drive from Corfu Town and the airport. The property has recently had its price cut by €100,000 and is available through Hamptons International.
Treasure Cove Circle, Florida, US, $1.77m
A three-bedroom, top-floor condo in North Palm Beach, about 30 minutes’ drive from Palm Beach international airport. The property, which has more than 2,500 sq ft of internal living space, is available through Christie’s International Real Estate.
Villa, British Virgin Islands, $9.5m
St Bernard’s Hill House is a hilltop estate made up of a main villa and four cottages in Tortola, about 50 minutes’ drive from Terrance B Lettsome airport. The property, which has five bedrooms and comes fully furnished, is available through Christie’s International Real Estate.
Villa Anna, Tuscany, Italy, €17.9m
An 18th-century villa with 10 bedrooms in Pietrasanta, about 35 minutes’ drive from Pisa international airport. The historic property is surrounded by formal gardens, has views reaching down to the coast and is available through Savills.
By Nathan Brooker
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