The Other Perspective: The Coronavirus As An Opportunity, Not An Obstacle
Over the last few years, the idea of a recession has floated around, a dark cloud constantly looming over any investor’s mind. Consumer debt had reached its highest levels - a whopping $12,000 per capita on average - and growth rate has hovered at its lowest since the last recession, among other foretelling indicators. To top it all off, a quick look at historical business cycles just seems to substantiate the claim that a recession was well on its way.
So while the coronavirus may have plummeted the economy into a recession, it can’t be conclusively declared as the root cause, but simply a catalyst.
Clearly, measures taken by government bodies around the world have had pretty strong impacts on real estate, but these impacts, at least in certain countries, may in fact be the silver lining in these tough times, particularly for property investors.
Lower Interest Rates
First of all, interest rates. I can’t recall the number of times my phone has sent me a notification of a central bank around the world announcing for lower rates over the past two months. And with the path of recovery stretching long ahead, we can expect these to stay low for now. Low interest rates essentially translate as cheaper financing in the world of real estate.
At the same time, it means fixed income investments such as bonds or certificates of deposits will record lower returns. Consequently, investment funds or high net-worth individuals will likely shift capital into real estate in the near term. This suggests that not only would it be cheaper than before to buy property, but the value of purchases may see a steep upward climb in the following years as driven by the surge in demand.
Higher Rental Demand
Here’s the ugly truth. As many individuals - potential homeowners - have been furloughed or even fired over the past few months, home ownership will continue to decline. Instead, consumers will need to rent, especially in the bigger, more expensive cities. As governments around the world try to alleviate the financial burden of its population, it could be possible to see the implementation of tax breaks or subsidies pertaining to rent. This would potentially drive up rental demand, once again posing as good news for any existing or upcoming owners of rental property.
Nonetheless, with coronavirus-related uncertainty still plaguing the world, investors shouldn't feel the need to rush into purchasing right this moment. As the situation remains fluid, investors should continue to exercise the usual level of consideration to best understand the market and its offerings in order to capture the optimal investment opportunity that would best address their financial goals.