The Impact of COVID-19 on the Real Estate Industry
Every market has come under threat during the COVID-19 pandemic, but real estate may have suffered most of all. Here, we examine how the real estate industry has tried to cope, looking at Singapore in particular.
The COVID-19 virus is a global pandemic. With countries worldwide reporting cases, it is no wonder that it has greatly affected economies on a huge scale and reach. With more and more people confined in their homes, investors are now scrambling to come up with contingency plans to make sure their assets remain safe from it all. Of all the industries, the real estate sector seems to be the most affected. Hotels, restaurants, and retail stores are now empty.
Effect on Commercial Real Estate
In Asia, particularly in the hardest-hit areas, retailers are closing up shop. Retailers are being forced to send their workers home and stop operations. Restaurants, in the absence of customers, are left with no choice but to offer door-to-door deliveries or close as well. With travel bans in place, the usual busy areas of tourist spots are now deserted. With no sales, companies are forced to hold their wages and figure out how they will cover their monthly rent payments.
Many businesses are now asking their real estate brokers like the Jeff Tabor group to negotiate rent relief and other forms of support to keep their businesses afloat. In Singapore, their restaurant association already requested shopping mall landlords to cut rents by at least 50% for the next three months. Some retailers have already granted relief measures including marketing assistance programs, flexible rental payments, and a rental rebate.
Effect on Residential Real Estate
Many think that the impact of the coronavirus should not extend to residential real estate. However, the effects are now felt within the residential sector as a number of home buyers are skeptical over fears of uncertainty – which is an expected outcome whenever something unusual happens in the markets. Fears about the virus caused the stock market to drop by over 1,000 points.
Real estate agents, however, believe that this is a good time to list their properties on the market. Uncertainty can sometimes equate to opportunity. Those who already have existing mortgages can negotiate to get the best deals possible. Based on the data provided by Black Knight, as many as 11 million homeowners can move to save more money through refinancing.
Preparing for the Worst
Some of the malls in Singapore are slowly opening up shops despite the few numbers of buyers trickling in. Many believe that they have better chances of recouping what they have lost by continuing to operate. Nevertheless, they are still wary and are constantly finding ways just to break even and still provide goods and services. Restaurants are now offering food deliveries to doctors and nurses. Some of them are opening only when healthcare workers need to go out, take a break, and eat out. Right now, it is a give-and-take scenario.
The Bottom Line
Uncertainties can happen in the market. As we are experiencing, one crucial factor can affect the economy on a grand scale. In this case, the coronavirus or the COVID-19. With no known cure yet, real estate investors, home buyers and sellers have nothing to do but wait and see what comes of the virus and the real estate industry. For now, people should expect the worst and pray that their assets don’t turn into liabilities. COVID-19 could very well be the next Great Recession that we should brace for.