Is It Too Soon for Real Estate Investors to Imagine a Post-Coronavirus Reality?
Well, that was much faster than we had expected. Who would have imagined, just a year ago, that by 2021 humanity would have already managed to develop a vaccine against COVID-19, and to start immunizing itself? While there are many reasons for optimism, regarding the light at the end of the pandemic’s tunnel, for real estate investors it might be a bit too soon to rejoice.
While the global economy is starting to shake the dirt off of its shoulders and to assess the damage caused by the virus, there are a few things that real estate investors need to keep in mind in this process of recovery. My name is Ofir Eyal Bar, and I’ve gained over two decades of experience in real estate investment and entrepreneurship, all over the globe. I believe that it may take time for real estate in general — and real estate investment more specifically — to go back to ‘business as usual’, and I will try to explain just why.
All for one, one for all
Over the past year, we’ve been told repeatedly that our ticket out of this pandemic depends on our solidarity. Time and again, we’ve been made to understand that we must take all measures to prevent contagion, especially toward people who are more vulnerable to the disease’s symptoms. However, now that the vaccines are on the market, it seems like the nations of the world have adopted an ‘every man for himself’ attitude.
Richer countries are stocking up on vaccines, leaving very little to the poorer ones. COVID-19 isn’t going to be behind us till every corner of the world gets access to the vaccine. This means that the virus is going to be around even past 2021, especially in poorer nations. What makes matters worse for the real estate industry is that the poorer nations are those which usually provide manpower for construction. Hence, the picture is clear: As long as there’s no real social immunity, the real estate sector can’t completely bounce back — and prices are going to react accordingly.
It takes time
If there’s one personal trait that investors in real estate must be blessed with, it is a long-term point of view. It isn’t uncommon for an investment of this kind to be completed before the asset itself — whether a residential building, an office complex or even a storage house — has even been constructed. Add to that the fact that investing in most types of real estate demands leverage (a mortgage of some sort), which subsequently demands a long-term repayment plan.
This means that while people are still trying to find out what the future holds financially, as we start bidding farewell to the Coronavirus, it might be more complex for them to think so far ahead. Will this be a deterrent from the real estate market? Time will tell. One thing is sure, though. It will make potential investors think twice about every dollar they take out of their wallet and place on real estate, and that might even slow down construction processes.
The gates are closing
The initial response strategy to COVID-19, adopted by almost every nation on the globe, was an immediate shutting of borders. At first this came with an epidemiologic rationale — to have as little of the disease enter the country as possible. Later, though, this became much more of a financial issue, with governments pushing citizens to purchase and invest domestically, sometimes even making importing goods very difficult.
What does this have to do with real estate investments? It’s a bit complicated. Governments are going to make the best of efforts to attract investments from abroad on one hand, but also to deter local investors from taking their money somewhere else on the other hand. Don’t be surprised, hence, if policies are going to change frequently in 2021, and if nobody can really tell when the best time to invest in real estate projects is, as a result.
But what’s the bottom line?
As you can see from all I’ve described above, there is no unequivocal conclusion that can be drawn. I, Ofir Bar, am not saying that the real estate market is deep in the mud and that it may take a while for it to recover, and I’m not saying that we can expect business to be as usual in a metaphorical jiffy. I am saying that it’s too soon to be optimistic about the effect of the vaccine on the market. My advice would be to wait and see what time brings in the next few weeks or months.