The Coronavirus pandemic has caused unprecedented fluctuations in industries across the globe. One of the sectors that are struggling to stay afloat during this time is the travel and tourism industry. While the pandemic has enough of an effect on each industry, many industries affect each other. For instance, with or without the pandemic, the tourism industry affects real estate prices. This study, for example, shows that tourism has a positive effect on real estate prices in Italy – though this may not be the case in other cities. Let’s take a look at how tourism affects real estate prices and how these industries have been faring since the pandemic.
School districts, commercial establishments, and tourism
Similar to how credit scoring tells you about a borrower’s loan and payment behaviors, the surroundings of a neighborhood are indicative of the area’s lifestyle, culture, and real estate value. One of the things you must look at is the neighborhood’s proximity to commercial and institutional establishments. One of the first things people look at is whether the neighborhood is within or close to a good school district.
Proximity to a school district boosts the value of surrounding residential areas. Generally, more affluent neighborhoods are known to be close to a good school district. The better the school district, the more value added to the neighborhood. A study from realtor.com shows that homebuyers are willing to pay up to 10 percent above their budget for a neighborhood with the right school. This is because a higher neighborhood value means a higher resale value. Even homebuyers who don’t have children or are looking to send their children to schools outside their neighborhood school district should consider school districts when looking for a place to live.
Other features that are guaranteed to boost residential property value include public transportation hubs, grocery stores, and recreational areas such as parks. Well-known food chains are also known to increase property values. A study by Harvard Business School found that houses within walking distance of a Starbucks can see an appreciation of up to 96 percent. Similarly, a neighborhood’s proximity to tourist spots has the power to increase nearby home prices.
The COVID effect
Safety measures such as domestic and international travel bans are still in place, so the travel and tourism industry is one of those most negatively affected by the pandemic. In the US, the state of real estate prices depends on the area – big city homes are dropping in value while homes in suburban areas see boosts. More people are moving to less congested areas such as rural, suburban locations.
Apart from the low volume of tourists, there are a lot of other factors at play here. One is that millennials, who make up the biggest population in today’s workforce, are leaving big cities for the suburbs. There’s evidence to prove that this has been happening before the pandemic struck, but the pandemic only served to accelerate it. The things that once made big cities so appealing to millennials – hip restaurants, cultural hubs, shopping centers, workplaces – have closed down due to the pandemic, thus robbing these cities of their allure. The prolonged isolation period has also left many city dwellers feeling cramped in their apartments and longing for larger properties with bigger outdoor spaces.
New York City, which had been the American epicenter of the virus at some point, is a fine example of this since the pandemic has forced many of its public events to either cancel or go virtual. Theatres both Broadway and otherwise have had to close down, as have other tourist spots such as the Metropolitan Museum of Art, and favorite tourist activity Liberty Island cruise. As a result, rent prices have tanked across all five boroughs, though at varying degrees, and experts say that it may take years for prices to return to their pre-pandemic standards.
Tourism is vital to a location’s economy and real estate. That it has struggled because of the pandemic has caused real estate prices to tank in big cities. Suburban areas, however, are seeing higher values as people flock to these less congested locations, having felt cramped in their small apartments in the city. Even with mass vaccinations on their way, it may take a while for big-city real estate to recover.