We are passing through some extraordinary and trying times right now. The investors are being tempted to take their money out of real estate projects and putting it under the blanket until things get settled down. But the question, will things settle down? Real Estate is one of the core sectors of any economy.
The global shutdown arising out of the Covid19 pandemic is said to have big effects on real estate markets worldwide. Of course, it might not have the same effect what the world had witnessed in 2008/2009 that is a historic global real estate stock crash, resulting in the property prices to have fallen by 70% and more. These collapses were more of a result of bubbling prices and excess lending. The markets which survived are those which have less leverage at work.
What’s going to happen this time?
“Surviving Markets Will See Relative Booms.”
Every property market worldwide has been affected by this pandemic but not all are in red. The surviving markets – the properties where you can live comfortably off-grid and self-sufficiently are bound to have been in demand than ever and are expected to hold on to their prices.
Why will Branded Markets Recover Fast?
If you’re thinking of long-term impact, you would notice that the branded markets will be least impacted. The branded rental properties would always be able to find a renter or buyer, though they’re still under stress.
Before the quarantine, the prices of these markets were soaring. Few listings were withdrawn during the extended period of lockdown. In the real estate industry, there were very few new properties that had displayed in the market. When the cities will reopen, there will be a surge of new listings.
Why will Vacation Rental Markets Collapse?
In this crisis time, the markets that are hardest hit will be second-home or vacation-home markets. They expect to be collapsed with immediate effect. Due to lockdown, there are vacation markets that have shown zero tourist traffic and as a result, this has negated the rental returns and lead to depreciating values up to 50%. However, these well-established and relatively accessible markets will come back to its original gear after the lifting of lockdown.
High population -density cities have seen collapses in their rental markets as demand across the board—residential, tourist, and commercial have diminished. Then, the vacation and second-home markets would rebound slowly. The Interest will pick up as air travel returns, but it will take at least 2 years for meaningful recoveries. In this circumstance, the following three things to be given importance:
- Invest in those projects that make financial sense.
- Lending money to other investors rather than making tight deals.
- Work hard to raise money to take advantage of opportunities that come your way.
Why will Livable Low-density cities show new demand?
The world’s most livable cities with moderate population density would recover quickly and will witness boom as the people look for options of reinvention and will go to the locations that offer a good and affordable quality of life and can provide relative safety from the pandemic.
What will be impact on the different financial and stock markets?
As the world is battling out with Covid19, the impact on the global economy is still not clear, but it’s creating huge disruptions to certain sectors of the economy. The real estate has been tumbled in recent days as the virus spread and the investors have struggled to price as it’s difficult to access the potential economic fallout and growing downside risk. The Central banks are responding aggressively to the current crisis.
The Commercial real estate sector is not the stock market and is moving slowly and the leasing fundamentals don’t swing drastically. If the virus crisis lingers, it will have a sustained and material impact on the broader economy and could impact negatively on the property as well. The outbreak has also prompted the investors to go for the bond markets, where lower rates are more attractive.