Most people from around the world have been locked down for a very long time or are still on lockdown inside their house or apartment. This pandemic isn’t just changing the way we feel about our homes but it has a huge impact on property markets around the world, as well.
It is fairly clear that with business failures, job uncertainty, massive unemployment, and wage cuts, many people will be cautious about making investments amidst the recent outbreak and the recession.
In most historic recessions, financial experts prove that the property market has either remained largely resilient or was only impacted across certain real estate sectors. But once cities and states reopen, that would be a reasonable time to think about buying a real estate property.
According to BBC, the Nationwide house price index in the UK for May showed that prices fell 1.7% from the previous month, the largest decline for 11 years. Despite the UK government’s decision to put much of the economy on hold, there are still some signs that the market is starting to stabilize as the current situation is not a typical economic downturn.
Experts in the field believe that transactions will start rising again in the coming weeks in a sluggish way; but as the nature of the coronavirus pandemic remains uncertain, one should look into the specifics of the local and national market of the city they’re looking to invest in.
So what can be considered as smart real estate investments amidst this pandemic?
One great source of passive income via rental payments and capital growth is a buy-to-let property. For first-time buyers, it can be an alternative route onto the property ladder. However, the global economy and the renter’s market today are both on the rocks so be very cautious as some tenants may struggle to make their payments on time.
Commercial Real Estate
Commercial real estate poses the biggest risk for investors as its market has fallen by almost 28% because of the pandemic. Because of the phased reopening of economies, it will take some time to correct the drop-off and the recovery for sure would be very gradual.
Despite the downsides, there are also opportunities as there will always be investors who look at the long-term potential of these real estate sectors with strong fundamentals, such as industrial and residential real estate.
For those with adequate finances, now is the time to invest. Now is the time to grab the opportunities in the property market where interest rates were slashed, the cost of borrowing has become cheaper and the market is offering more affordable mortgages for real estate investments. If you already have a plan to invest in a property, a mortgage calculator can help you in projecting the monthly payments, interests, and overall costs the investment might cost you.
One last thing to consider in any financial investment like real estate, make sure you have savings or emergency funds. It is recommended to set aside three months’ salary in cash to help you through a difficult period; but in the current economic situation, six months’ worth is a safer bet. An emergency fund is needed as it gives you peace of mind knowing you have a barrier against the worst financial disasters, like this pandemic and the current economic downturn that is affecting people from all over the globe.