There is a shutdown universally as a result of the COVID-19 pandemic. It has its repercussions on every industry and sector including real estate. While the market forecast is mixed about the fallout of the pandemic, it is fair to say that realtors can still make the best of the given situation and use the tools at hand to survive in this scenario.
Here are some predictions:
Survivalist Markets will thrive
What does this mean? While every property and real estate market will be somewhat affected by the shutdown, not all is lost. There is something called the “survivalist” market. This is for properties in places where you can live comfortably off grid. A sort of self-sufficient ecosystem. This will be one of the most sought-after markets in the post-coronavirus world. For instance, land in Cayo, Belize, which is considered to be at the top of this list of survivalist locations.
The other reality is that brand name markets such as real estate in Paris or Singapore will always be much in demand. While top tier rental markets may take a short-term hit, experts say they will bounce back with a bang.
When markets like Paris reopen for selling, buying and renting, there will be a surge of new listings. This will be an excellent opportunity for buyers as there will be a short-term softening of rates.
Another city with brand-value that will survive the slump is Panama City. A regional headquarter to hordes of multinationals and a finance hub. Panama City has a huge and diversified pool of buyers and renters from the world over. Places like Panama City or Lisbon, give investors an opportunity to buy at a better price once things are in motion.
Impact of vacation rental markets
In the shorter term, the most impacted might be the vacation rental markets and second home segment.
Markets like Cancun and Playa del Carmen, Mexico where zero-tourist traffic will impact rental returns and lead to depreciation. Same is true for high-density cities that will see a collapse in the rental markets and residential, tourist and commercial real estate.
However, as things get back to pace, vacation and second home markets will rebound eventually.
Low density cities will emerge winners
Some of the world’s most livable cities with modest populations will recover sooner than others and see a boom in investment. This fresh lease of life will come from people looking at options for starting over in a location that offers great and affordable quality of life and perceived safety in terms of density.
One big opportunity that is a direct result of the crisis presents itself in the form of the supercharged U.S dollar buying power.
Here is how to create more opportunities and take better decisions.
- Many buyers will have to purchase without visiting. Novice property buyers can’t risk it and will have to wait until they can travel.
- Both buyers and sellers need to make the most of current technology and use things like video walkthroughs and virtual tours. If a property you are interested in doesn’t offer one, ask the agent to create it for you. Virtual apartment tours will be huge in major cities for years to come.
- Foreign and domestic funds will try to cash in on this opportunity and there might actually be more lenders in the real estate markets offering loans at competitive rates. As such, banks will be loaded with liquidity and might offer low interest rates. It might also be a good time to apply for a personal loan as banks will offer easier terms and lower interest rates as credit growth declines.
- Buyers must opt for premium properties in premium locations. Premium properties in some of the prime real estate will be the first to recover from the impact of the pandemic.
- It is best to avoid investing in pre-construction deals in the near future. Trust solid real estate companies with a strong market reputation and goodwill.
- Prices will crash in some of the most luxury and appealing locations in the world in terms of the local currency. This will make the prices even more appealing from the dollar-holders perspective. This is the right time to invest in a luxury property if you have the means.
- The importance of technology can’t emphasized enough. Try to use teleconferencing and e-signing programs as much as possible to negotiate your contracts. You can handle all offers and processes digitally now.
- Cap rates on real estate will go down globally. Investors must look to purchase properties at below replacement costs and try searching for leases that have longer lock-ins.
- Look to purchase only completed lease assets to mitigate leasing and development risks.
Using such strategies, you will reap rich dividends even in times of crises. Profit in real estate is made while buying and not selling. Historically, people who have invested wisely at the times of distress and fear have made the most money. Revisit opportunities that one may have lost earlier by not giving in to seller’s demands.
While real estate is all about location, right now it is all about identifying the right property at the right time.