The COVID-19 crisis continues to reshape many aspects of life, with the pandemic forcing the implementation of lockdown measures for more than 2 billion people around the world. It has brought a level of uncertainty on the global economy as many sectors and industries bear the brunt of reduced business. The short-term effect is undeniable, given that many offices and shops are closed, and people are staying at home. When the health risk passes and economies re-open, the long-term impact may start to become more apparent.
Among the sectors hit hard by the coronavirus is real estate. Some landlords have been forced to hold onto their properties for longer than they had planned. In other ways, the pandemic has brought to the fore trends that were steadily gaining ground, such as the preference for online shopping by many consumers. On the other hand, the capacity for individuals to work from home will come under scrutiny, especially where some might see this option as a better alternative and possibly seek larger home spaces.
Responding to Uncertainty
Around the world, various countries have implemented different policies to mitigate the spread of the coronavirus. From social distancing measures and mass testing to fiscal and monetary policies aimed at cushioning economies, there has been an abundance of responses. In real estate, policy changes have been implemented to help both landlords and tenants navigate the uncertainty.
In the United States, for example, more than 30 states have temporarily restricted evictions, while some mortgage lenders have suspended payments. Several states have put a stop to construction activities, only allowing essential projects such as the building of medical facilities to continue.
In Europe, countries such as the UK, France and Germany have also suspended evictions, with mortgage relief offered in the UK and Italy. Banks are encouraged not to foreclose on late payments, while various governments have granted retailers tax relief. Rent and mortgage holidays are also being offered in various countries.
Real estate experts estimate that investment transaction volumes will likely reduce in the course of 2020. Property bidding and marketing activity remains less competitive than before the pandemic. While some transactions in advanced stages are likely to be closed, newer deals may have to wait until travel and self-isolation bans are lifted. The uncertainty is also likely to impact the availability of debt capital negatively, making it difficult to obtain credit unless terms were previously agreed.
Many real estate investors are likely to adopt a ‘wait and see’ approach to the market. Razi Salih, an investor with interest in north Europe’s property market, is among those who will keep close track of developments as the year progresses.