July 15, 2020

The New Order: Analyzing the Post-Crisis Trends in Real Estate Investing

An empty street scene caused by a strict social distancing measure during coronavirus pandemic

To many enthusiasts of conspiracy theories, nothing will beat the New World Order that has been echoing through the corridors of civilizations even before the 21st century began. It has been feared, overly hyped but nevertheless highly anticipated by many curious minds. Meanwhile this 2020, no one could have imagined the laser beam trajectory of a new order in many industries, brought about by the current apocalyptic world health chaos…and real estate investing is of no exception.  

It has become evident that this health crisis will lead to many drastic changes in everyone’s behavior, and certain socioeconomic trends are beginning to emerge and become clearer by the day. In order to produce a close-to accuracy prognosis on the trends likely to surface post-crisis, we have to put into consideration the results of the latest analyses and research outputs done in a worldwide approach. The Covid-19 economic shock is having a material impact on the real estate market through multiple channels.

 With no time to prepare, the damages of this health pandemic scattered through every direction like wildfire. Rising unemployment is affecting individuals’ ability to pay rent and mortgages. The lockdown measures adopted by many governments from all over the world are aggravating some pre-existing vulnerabilities such as overcrowding, the quality of dwellings, connectivity challenges, domestic violence, and homelessness. These can have long-lasting effects on health disparities, economic inequality, and social mobility. Low-income households are more likely to live in overcrowded and low-quality homes, and adolescents in low-income households are less likely to have good internet access, especially in developing countries.

This account leads us to a clear vision of how the post-pandemic era will result in several socio-economic changes.  Only then can we redirect real estate investors to make investments in the right location at the right time. Positioning all these considerations, we can have a foresight of possible trends we can expect to witness in the real estate industry in the coming months.

Defensive Investments

A defensive wealth strategy can be expected from investors by directing their investments toward the safer sanctuary, such as gold reserve for more traditional investors who want to play safe, or bitcoin revolution (cryptocurrency)  for the millennial type. However, real estate investing is still the ultimate tangible investment and a safe haven for all, especially when financial markets and Forex status are in an unprecedented state of volatility. Real estate professionals can, therefore, expect to receive numerous requests from highly liquid investors looking for the available best real estate investment opportunities to safeguard the stability of their wealth. 

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Modified Buying Equation  

The democratization of remote work, the key factors of space, quality of life, and financial incentives in many cities will gain its long-overdue splendor, value, and popularity.

In Europe, London and Paris have reached peak prices per square meter as compared to other European capitals such Madrid, Lisbon, Athens, and Rome, which are a fraction of the price for comparable prime real estate. They also often offer a better quality of life and tax incentives or golden visas for international residents.

In the U.S., reports say that many New Yorkers have been leaving their city apartments for less-urban surrounding areas that are easily accessible by train, or even migrating south. Many home buyers are heading towards Miami as more and more companies have decided to make it their new home.

An Influx of Divorce Cases 

An undeniable factor was observed in China that might also be an indicator for the U.S. is the increase in the number of divorces following several months of lockdown. If the same consequences take effect in the United States, there is no doubt that the real estate market will be boosted with the search for new housing and new properties for sale.

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Luxury Redefined 

Unequivocal certainty anyone can consider right now is that the new post-pandemic luxury feature will be “space”. After weeks or months of home confinement, many people are now beginning to realize the importance of having a large living space, a true home office, outdoor space, and amenities. The new awareness of the importance of the quality of life, the return to essential core values, and a renewed desire for open space will definitely be of utmost consideration for many investors looking to reconsider their lifestyle.

The ultra-centrality or proximity of the workplace will possibly lose its value per square foot because working from home will increasingly become a real norm and no longer a temporary protocol. The heavily regarded real estate adage “location, location, location” may lose some of its innate charms. Many employers and companies are realizing how working from home increases productivity in a way they have never imagined. All credits to technology, it is notably cost-effective, with less commuting time and more focus versus a physical presence in the office. If it indeed works so well, there will be a lesser chance to go back to that setup after the end of this health crisis. If working from somewhere specific is no longer a requirement, we can expect to see massive moves in all parts of the globe.

The World goes Digital

Since physical tours/showings are still forbidden in most properties and the fear of infection will not fade overnight, we have to re-imagine how showings can be done digitally both now and in the future. To adapt to these new constraints, we must accelerate the adoption of effective digital tools plus self-directed tours for clients via Facetime and Zoom, so we can sell without clients having to step a foot inside. The future of real estate will reside in more transactions done remotely and Real Estate IQ has been spearheading the bandwagon by headlining its campaign for virtual training and webinars. Check out our website Real Estate IQ for an all-access pass to all-things real estate. 

Real estate experts are in no doubt about the footprint that coronavirus is going to leave on the sector. Highlights include greater digitalization, new investment opportunities, and higher productivity. Several conferences, all online, in which leading professionals from the sector have participated, have highlighted these concepts. All industry players are eager to get through Covid-19 and get back on track to quickly adapt to the new normal setup. 

A closer look at the post-crisis world will give us an enlightening on what is yet to come or more importantly, what is here to stay. We can speculate the post-crisis world will be more indebted, less global, and more digital. Investors will need to contend with higher taxation, financial repression, and moderately higher inflation, along with populism and protectionism, while navigating the transitions from global to local supply chains, and from physical to digital.

Source: Summary of remarks delivered at the Organisation for Economic Cooperation and Development (OECD) policy roundtable on housing policy responses to the Covid-19