For many years, life in the city has often been seen as preferable to a suburban existence. In the 2013 book “Happy City,” Canadian journalist Charles Montgomery employed psychology, history and the humanities to show that city dwellers are healthier and happier than suburbanites.
In the 2011 book “Triumph of the City,” American economist Edward Glaeser argued that cities offer better living, not only because of the ease of transportation but because cities are the focal point of information, renewal and innovation. Many experts argue that if you have the cash, you’re better off in a city than a suburb.
Of course, the coronavirus has gotten in the way. Once places that embodied opportunity and ease, cities and their high population densities have become coronavirus colonies. Lockdowns have turned apartments into cages, leading many to take flight to the suburbs.
In a study led by the Swiss bank UBS, of the 3,750 wealthy investors surveyed, 46% said they’re likely to abandon cities forever, 70% said they plan to reduce the time they waste commuting and spend more time with their families, and 88% said their current top priority is their health. The survey's respondents hail from 15 countries including the United States, Britain, Germany, France, Japan and Singapore, and all of them are individuals with investment assets between $250,000 and $1 million.
The shift to the suburbs has buoyed housing prices there. In Britain, suburban homes that before the pandemic cost more than five million pounds ($6.5 million) are now going for 1.2% more on average – topping any other type of property in the UK.
As of May, 5% of New York City residents, about 420,000 people, had departed. In the wealthiest sections – the Upper East Side, the West Village, SoHo and Brooklyn Heights – 40% had left town.
According to the real estate firm Douglas Elliman, since the outbreak of the coronavirus, real estate prices in New York have plunged 54% from the same period last year, the steepest drop in the past 30 years. And in late May, the real estate firm Olshan Realty reported an 88% drop in luxury home sales in Manhattan since the start of the crisis, compared to the same period last year.
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In cities, buyers are overcome by emotion and want that new home ASAP, with the big back yard and the swimming pool.
The coronavirus has thawed out a market that had been frozen for many years, real estate agents around the United States say. Realtors in the suburbs report an increase in inquiries and home showings a few times over.
The pressure for change has also led to a new phenomenon – buying a home sight unseen save for a virtual tour. When the lockdown was in effect in New York, 10 people bought luxury condos at between $2 million and $6 million in the Financial District. The promoters expressed pride in that the buyers were “practically a captive audience.”
According to The New York Times, between March 15 and April 28, migration from New York City to Connecticut had increased 74% from the same period the previous year; for New Jersey the number was 38% and for Long Island 48%.
The coronavirus has badly eroded the advantages of living in a large city. The consideration of proximity to your job is no longer relevant with the transition to remote work.
Another factor chasing residents out is the closure of restaurants and bars due to the pandemic, and the realization that some places will never reopen. If your bustling social life is over, why stay?
In Israel, too, wealthy people seeking refuge from the virus and the lockdowns are looking to the suburbs. But they’re not rushing.
“Real estate is a market that acts slowly and where decisions are reached in a well-considered and long-range way,” says real estate appraiser Yaron Spector.
“It’s unreasonable to think that immediately upon the outbreak of the coronavirus people living in luxury residential towers, in Tel Aviv for example, will decide to sell the property. As of today, we’re not seeing any trend of selling luxury homes in large cities and moving to private homes in prestigious villages and towns.”
Instead of abandoning their residences, owners of luxury apartments – with an emphasis on high-rises – are seeking a place that can serve as a “safe house” and a weekend vacation home.
“If before the coronavirus we had about 10 requests a month for freestanding homes, in June there were 22 such requests, and even before the end of July we had 28 requests for villas,” says Oded Nahum, responsible for Herzliya Pituah and Kfar Shmaryahu at the luxury real estate firm Neot Shiran. “Buyers in the top percentiles seem to be showing renewed respect for the backyard, pool and privacy that come with a house of your own.”
Nahum also notes less demand for apartments in central Tel Aviv and in the city’s seafront high-rises. Demand had been increasing before the coronavirus. Now, owners of private houses are reconsidering the idea of selling their homes and moving to the city; they’re more inclined to stay put.
As in the more routine days of yore, during the coronavirus era demand is still mainly in the center of the country. “We’ve seen increased demand for luxury apartments in Tel Aviv in projects that boast a high level of facilities such as a swimming pool, gym, sauna and game room,” says Yaffa Sadan, vice president for marketing and sales at the real estate firm Yossi Avrahami.
“People are realizing that if there’s going to be another lockdown, their home has to be a safe and pleasant place where the family can live their routine life without disturbance,” she says.
“Also, the coronavirus has given us a greater appreciation for the size of the balcony. If in the past the balcony’s square footage was a marginal consideration among buyers, now you could definitely say the balcony ranks high on the list of pros and cons in selecting an apartment.
“Similarly, there has been a steep rise in interest in garden apartments, both in Tel Aviv and in Eilat. I have no doubt that this will have a long-term effect on consumers’ preferences in the luxury market – emphasizing the living space outside the walls of the home, both in terms of the area and the level of equipment and furnishings.”
Even as you get farther from Tel Aviv, the most desired areas are mainly moshav agricultural communities in the center of the country, those with lots of acreage or big private homes, says Meir Vider, chief executive of the Vider mortgage company.
His list includes Beit Yanai, Herut and the town of Gedera, and similar places that in a few months have become highly desired. Vider says that in most of these smaller communities, prices have jumped 15% to 20% during the pandemic.
“With interest rates on mortgages so low, many wealthy people prefer to leverage their money that’s sitting in the bank, rent out their existing home and buy another property to live in out in the outskirts,” he says.
Buying a home can also meet another need – leisure and tourism. Restrictions imposed on hotels and the fear of contagion are driving Israelis to snap up a second home for use as a holiday apartment.
According to Sadan of Yossi Avrahami, Israeli families have been purchasing small apartments in Eilat that will provide a substitute for hotel stays.
“If in the past investors were buying these small apartments, today it’s families, and sometimes it’s a few relatives acquiring a vacation apartment together for the extended family with the idea that during part of the year they’ll use it as a vacation home. And when it’s available they’ll rent it out short-term and reap a high yield.”
Try a country estate
Owners of real estate firms in the United States are split on whether the shift in buyer preferences is permanent. Some compare the current crisis to the Great Depression and say we’ll see a permanent shift in how people view the world.
But others compare the coronavirus crisis to the period following 9/11, which also spawned migration out of cities – until the status quo ante returned about three years later.
“I feel that we’re talking about a long-term shift, a trend rooted in a change in how we view the world and priorities,” says Nahum of Neot Shiran.
“I don’t see that changing anytime soon. We’re seeing increasingly rising demand for these sorts of homes in all the prestigious areas, from Herzliya Pituah, Arsuf and up to Caesarea. Farms in the Galilee are also attracting greater-than-usual attention.
“The market for real estate in the moshavim and country estates in the [central] Sharon region, which suffered from lower demand before the coronavirus era, has woken up from its deep sleep and is flourishing – we’ve seen an increase of hundreds of percentage points in interest in county estates. There has been a reawakening even in the area around Lake Kinneret.”