COVID-19 has significantly altered our way of life. Economic developments are extremely liquid, which means that we are not yet sure of the impact of the virus on our economy. Like other sectors of the economy, real estate transaction has also been on hold causing tremendous damage to the sector. What are the effects of the virus on this sector? Here are four real estate sectors that could be affected post-COVID-19.
The emergence of COVID-19 has carved out a new path for us, which has affected the way we work and relate. Before now, although remote working has already gained momentum, some employers do not allow their workers (no matter how they try) to work from home. However, because of the situation of things, employees are now required to work from home, which means that more companies are encouraging remote working. And employers are now unexpectedly testing what the future of work will be like with smaller office footprint.
Therefore, if a company can successfully manage its employees, remotely without affecting productivity during these trying times, expect higher demand for telecommuting after COVID-19. This, in turn, will affect the way we work and interact as demand for co-working offices would decrease.
Social distancing remains the only viable means of mitigating the risk of contracting the virus. So, health practitioners recommend it over other means. For this reason, if the large percentage of the population goes by this recommendation, this will be a big blow to retail stores—,, especially the brick and mortar stores. How? If people decide to avoid visiting the stores, they need to device other means of getting essential things. This means that people will need to go online.
Although the use of online services has increased significantly in the past years, a higher percentage of the population has never even tried it. Because of the advent of the virus, more people would have to try it out now, thereby marketing the niche to a higher percentage of people. However, if the new users find it intriguing and easier to use than visiting the store, this could win customers for e-commerce. And in turn, it can alter the way the brick and mortar stores do businesses.
The instability of the stock market in recent weeks has a bad effect on investors. And this has caused them to sell off stocks and invest their money in a less volatile market—bonds. This, in turn, raises the demand for bonds causing its price to increase. Therefore, the inverse relationship between stock and bonds market—the higher the price of bonds, the lower the yield (interest payment) relative to price—has caused a ripple effect that affects both sides. This means that the sharp decline in the yield has driven down the mortgage rate putting a lot of borrowers in the best position to refinance their loans.
Because of the effect of the pandemic, the federal government has directed the mortgage lenders to offer forbearance or reduced payment for mortgages backed by federal agencies. Although this is good news for borrows and an important measure to prevent collapse.
Checking from the lenders’ perspective, this might cause an unintended collapse that could bankrupt most lenders. Why? Borrowers are missing payments and homeowners are predicted to flood the market with refinancing requests because of the low mortgage rates. So, if care is not taken, most lenders will be on the hook and won’t be able to finance homeowners’ refinance requests. This could cause great damage to the mortgage industry.
If online shopping becomes more prevalent as a result of a larger percentage of the population trying to meet their needs, there would be need for spaces to store inventory at distribution centers. This will affect the industrial sector both positively and negatively. On the positive side, the e-commerce business owners need more industrial spaces to store ordered goods. This means that there would be an increase in demand for industrial properties.
While on the negative side, larger spaces mean more employees are needed to work. So, employers need to be more careful and cognizant of how this will affect their business in the future if another virus outbreak occurs.
While it seems that the pandemic will not have a major effect on the real estate market. As a real estate investor, it is important to brace yourself for the coming month as the future is yet unclear of what is to come. However, regardless of the effect of the virus in the short or long run, it is certain that real estate is a haven and it will always rise no matter how shaky the ground may be now.