Real Exside

How Coronavirus Impact Real Estate Industry.

The coronavirus has hit the real estate industry hard and is expected to go worse before it gets any better. Every sector and market will be impacted at different levels of disruption depending upon the span of economic cease.

Tourism industry comprising of hotels, restaurants, bars have taken the fall trailed by retail and housing sectors.

Quarantine situations pushed workers to stay home, disabling builders and developers to stop work and hence business shutdowns. This period when layoffs are in force drives the economic activity further slow and downward. All these forces together lead to an economic recession.

The Differential Impact Regionally

The influence of economic interruption in the real estate market will vary from one region to another. Say Thailand, is a hub for various important industries, during such a pandemic state all of them will suffer. Like

  • Hotels
  • Theme Parks
  • Conference Centers
  • Tourism
  • Restaurants and Pubs

So far it still seems unpredictable as to how Thailand’s property market will be affected.

The tourism industry will be hit in two different ways:

  1. a direct impact from contagion concerns and
  2. an indirect impact from declines in stock values and reduced income, which will translate into people feeling less wealthy and put a damper on travel.

The popular Tourism industry of Thailand will be impacted in two different ways:

  1.  The primary one due to the contagious disease spread i.e. COVID-19.
  2.  Also, the impact of falling stock values and layoffs in income, which will change people’s consumption behaviors emphasizing saving rather the spending on travel and leisure.

The Impact on Housing and Homebuilding 

Real Estate Developers have not only reported demand withdrawal from home buyers due to lockdown but also a shortage of building material supply. The drop in sales in high. All this together is creating heat for lending conditions on the non-conforming mortgage loans. Market circumstances are worse for those self-employed population as mortgage conditions are severe for them.

According to Coronavirus Commercial Real Estate Survey Data from Propertymetrics

Builders and Real Estate Developers have planned to slow down the land acquisition and development rate for the near course.The rental industry has the same set of issues.Tenants who have lost their jobs and are unable to make rent will ask owners for consideration.Landlords at the same time will focus on tenant retention rather than timely payments.At last property owners will seek forbearance from their lenders. The cycle will extend to the whole market hence creating an atmosphere of economic disruption.

 

The bright side of the rental industry is the demographic shift that will take place due to the pandemic. Lease renewal rates that were suspected to be fair before the crisis and the apartment construction rate around 70,000 units annually before the COVID situation will allow the gap to fill to overtime. The gap between the oversupply and demand of apartments, giving owners funds they need to sustain. Class ‘B’ properties (a property that is generally older, and may or may not be professionally managed) are likely to pay off better than fancy Class ‘A’ properties. Silverlining can be seen when the crisis passes and rental trends are back.

The units built for single-family rental business are fruitful as the preference shift will be seen soon. People will be likely to go for larger units that provide accommodation and work from home facilities.

Other Sectors of Real Estate Development

Office Sector is crucial when Real Estate Development is the topic. Most of the commercial office spaces are empty at this period, due to the precaution named Social Distancing. An important question to be noted here is will the WORK FROM HOME trend continue, and at what degree if so. Also if the recession period extends more than what is being expected right now, it will further slow down the demand for new spaces. But as soon as a pandemic is under control, new job generation will take place and demand will is likely to rise again.

Industrial and Warehouse spaces are facing momentary impacts from the delays in the supply chain. The positive side is it pushes to go people online and perform activities. So it’s merely a shift from physical encounters to online ones encouraging warehouse development.

What Lies Ahead For Real Estate?

The prime complication with this economic instability is its nature of hitting both demand and supply. When talking about demand, the future can be predicted. It depends on how effectively the outbreak can be contained (decline in growth rate and eventually fall). At that time the consumer buying power will strengthen once again and economic activities will start functioning smoothly to restore balance. The disturbance on the supply side may take longer to heal. As many natural factors are not in human hands. Especially, in the case of the outbreak not contained evenly across the planet, it can push start the fall in demand again leading to adverse effects all over again.

As China has been quite successful to overcome the COVID-19 situation, the patient rise is much lower than what was seen during the outbreak. Whereas countries like Itlay, France, Spain, Germany, and USA alone contribute to 62% of total global cases. China has reopened its market, with around 70% SME back in business and 90% large manufacturers operating again.

The dilemma with the virus is it likely to strike back, meaning it will rise again later this year. The solution to this situation is social distancing which needs to be practiced for a longer period, around 18 months according to the report by Imperial College in London. This avoids transmission, and the time it will take to maintain large stocks of vaccine to immunize the global population.

The period we serve practicing social distancing can cause serious threats to trade, commerce, employment, savings and eventually to the real estate.

A comforting prospect for real estate companies, as the housing bubble burst. Supply surpassed demand now investors can analyze and locate opportunities to take over assets at mellow prices. Financing rates are lower than anyone of us has noticed in our lifetimes. Maybe this is the golden moment when dream deals can be accomplished with assistance from Thailand’s #1 Investment platform- Realexside.com.

But meanwhile, Corona Virus has changed the story for 2020.

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