COVID-19: What the future holds in terms of Real Estate Investments?



In a matter of weeks, the 2020 picture had shifted 180 degrees, from a year with high prospects, to one that seems to bring the first economic downturn since 2008. The entire world is under heavy pressure due to the COVID-19 pandemic and the number of cases had recently surpassed 1 million. The United States and Western European countries are now the most affected, leading in terms of people infected and fatality rates. 

However, this isn’t the biggest issue the world had to face and a year from now, the epidemic probably be more contained and managed than it is today. Because of that, we have to take in mind the uncertainties the markets held at the moment but based on that be aware that changes, drastic as they can be, might create new options and new possibilities in the real estate market, and that will be our focus today.

COVID-19 an issue for markets

Based on the figures released by countries that have been successful in handling the outbreak from the start, COVID-19 is a disease with a mortality rate between 1-2%. South Korea and Singapore are two great examples of preventing the epidemic from spreading to a large number of people. But now all countries had managed to do that and that could have consequences even after the outbreak will be under control.

Financial markets had been dropping by double digits figures in Q1 2020, setting a new historic record. In the United States, the S&P500 and the Dow Jones Industrial Average had lost more than 20% in the first quarter, while Western European Markets like Germany, Italy, and France are in a similar position. 

Since the outbreak forced countries to impose lockdown measures, consumption, tourism and the transportation industries will be the most affected in the coming months. It will be a great challenge to overcome, especially if we consider that consumption had been the main driver of economic expansion in the past decade. 

Opportunity in the property markets?

So far, the real estate market does not seem to be affected by the situation. Interest rates had dropped substantially both in the United States and Europe, leading to people buying houses by taking more affordable mortgages. Some experts believe that despite the strong start of 2020, the coronavirus pandemic can still hit the financial markets, it’s a substantial threat that can impact the so important all-property confidence. 

The negative influences, though, should start to be felt during the second quarter. In the United States alone, more than 6 million people had filed for unemployment claims during the past two weeks, which would lead to a sharp drop in demand for properties. But viewed for a long-term picture, could that mean a lot of new opportunities will start to appear?

Europe vs. US – a difficult choice

The United States and Europe and currently the most affected areas. Given that Europe saw the number of infected people rising earlier, it’s very likely that the economic activity will begin to restart before the spread peaks in the United States. “Western European countries had done a great job with mitigation measures and despite a high number of infected people, the spread is not growing exponentially anymore. For a few months, we should see pressure on property prices, but that will mean a lot of new opportunities for real estate investors” according to Ofir Eyal Bar,  A Real estate investor active in Germany and The Netherlands among other countries. 

Given that the United States is still behind the curve in terms of handling the spread, the restart of economic activity is expected to occur with a delay of several more weeks, as compared to Europe. It will be a great challenge to get things back to normal, given that the number of infections could pick up steam again.

SummaryCOVID-19 will require a lot of coordination and commitment from all countries. Despite some short-term negative influences, experts like Ofir Eyal Bar are also looking ahead for the possibilities that will arise in terms of real estate investments after the current hardships, from a long-term point of view. The economy had always moved in cycles and each downturn had created a lot of new opportunities for people that are prepared to use them.

Source: https://kerra-investments.com/articles/covid-19-impact-on-the-real-estate-markets/