IN LIGHT OF A GLOBAL PANDEMIC, HOW WILL YOUR INVESTMENTS SERVE YOU BEST?
The current global panic surrounding the outbreak of COVID-19 is understandable and people across the globe are worried for their health. Beyond the health concerns, we dig deeper to understand the implications on investments and the wider real estate market.
“Coronavirus has sent financial markets reeling” and is poised toexact a larger toll on the economy in the coming months (Bloomberg).
As the number of cases of the rapidly spreading coronavirus increases, stocks are plummeting, and credit spreads widen. Jane Denton for ThisisMoney, states that investors are questioning how much further the UK stock market could fall and whether it could match the near 50% drop during the financial crisis, having already dropped 32% from its mid-January peak.
Cancellations of travel, events and conferences across multiple countries are affecting businesses of all kinds, with people across the globe to become increasingly concerned about job losses. However, we believe that the real estate market will remain buoyant.
EQUITY VS. BRICKS AND MORTAR
Arguably, investing in equity at the moment is highly volatile and very risky. Whereas investing in bricks and mortar is comparably stable and secure – whilst still providing great returns if you ride out the waves such as the one we are currently in. Whilst many will operate with caution in
the short-term, property investment is for the long-term and longevity often bring greater wealth.
Forbes states that so far, the UK market has proven mostly resilient to the collateral impact of the coronavirus. Real estate in general can be seen as a safe-haven and consumer confidence should remain resilient.
Another benefit to investing in property now, in particular in the UK, is the extremely low interest rates offered, currently sitting at 0.25%. This is beneficial as it will support stable house prices, even if there is a slight reduction in demand. Furthermore, the UK’s consumer confidence is still lifted in the wake of Brexit and many people will feel that they have put things on hold for long enough.
One London estate agency, Benham & Reeves, conducted a poll last week and found that, for 83% of buyers and sellers, coronavirus would have no impact on their decision-making. Across the pond, Gary Beasley (CEO of Roofstock, an American proptech company) has noted a rise in traffic
from international investors. He says that “people look at hard assets, like real estate, which are uncorrelated generally to the stock market, that tend to perform quite well on a relative basis during times of market volatility.”
When looking at previous virus outbreaks to compare market recovery rates, the most recent example to significantly affect the UK was the H1N1 pandemic (swine flu), which arrived in the UK in April 2009. This negatively impacted the economy, with fewer approved mortgages and reduced construction activity. Nevertheless, between March 2009 and March 2010 house prices increased 10.1%, rising to 5.6% in London. Even by the end of 2009 house prices for the year had increased 5.9%, leading Nationwide to suggest this was the result of a return of cash-rich buyers and low interest rates.
The graph displayed here shows the trend described as above, during the time that the UK was affected by swine flu. We would expect a similar pattern of activity to occur now.
Even if there is a drop in activity whilst the virus peaks, we expect the real estate market will swiftly recover following this and it will not let you down in the long-term.
THE CURRENT CLIMATE
From a wider aspect of how real estate can prevail through this pandemic, we look to technology. When writing for the housingwire, Mary Coleman states that “the technology landscape has made it feasible to instantly communicate, watch 3D videos of properties and the surrounding areas, perform lifestyle searches and even place your existing furniture in a property online.” All the online functions that we have at our fingertips nowadays will push the fact that maybe, and often as is the case with pure investment purchases, we don’t really need to see a property in person before we buy it.
Whatever viewpoint you take during this global crisis, at the end of the day, we all want to stay safe and financially stable through this time.
Michael Caspi of Stanford Medical School states that panic never helps and what we do need is a cautionary response. This is certainly how we are handling the situation, taking precautions whilst carrying on with our day to day lives, working as a team and working hard to help our clients secure their dream properties and investments.
If you are interested to make a worth-while investment into the UK, please get in touch with us today!
We can offer a host of property investment opportunities to suit all buyers. If you have something specific in mind, we will be more than happy to help you find exactly what you are looking for.
We also offer a wide range of property services including management and lettings.
CALL: +971 4338 7464 (Dubai office) M: +971 505 915762