Author: Joyce Chen
The BRB Bottomline:
COVID-19 has an unprecedented and far-reaching effect on the global economy, bringing up lots of uncertainties and potential risks for investment in 2020. The historically low mortgage rates provide possibilities for the potential investment return in the real estate sector. However, do the possibilities for the investment returns outweigh the risk of buying a property during a pandemic? There may be a lot of investment opportunities in the real estate sector if the investors navigate with caution.
COVID-19 has had a profound impact on the global economy, causing investors to seek opportunities to generate outsized returns under extreme market stress. The real estate sector displays potential investment opportunities due to the strong underlying demand for space and is expected to continue to grow as a result of the increasing demand for space due to the COVID-19 pandemic. The historically low mortgage rates also signify potential investment returns for the real estate sector. However, such opportunities may be overwhelmed by the risks due to the effects of COVID-19. In general, there should be a lot of investment opportunities in the real estate sector but the investors should be cautious with their choices.
COVID-19 may have a little adverse effect on the real estate sector. COVID-19 pandemic leads at short notice to shifts of purchase conclusions, on a long-term basis it will, however not reduce the housing demand. For many years, the demand for living space has exceeded the scarce supply of real estate in many cities and regions. This fundamental trend will not change significantly even in the current situation, as the reasons for the excess demand will continue to exist. The strong demand for residential space in recent years is due to population growth and the continuing influx into metropolitan regions and medium-sized cities. This has led to a significant increase in the prices of properties for sale and rent. New construction activities were also unable to meet the high demand. Therefore, COVID-19 will not draw down the housing prices due to the persistently high demand for housing, and the real estate sector will always drive potential investment returns for the investors.
In addition, there are other factors that may contribute to the long-term investment opportunity in the real estate sector. The high-quality commercial ground rents, social real estate, and quasi-public income strips have so far weathered the financial storm caused by the COVID-19 storm and the improvement in the terms of housing security also helps secure the demand for housing in the future.
Hence, the expected increase in housing demand and current and future promising market conditions may indicate the opportunities in investment for the real estate sector. Investors should put more attention to the real estate sector for now.
Joyce is a sophomore double majoring in economics and political science at UC Berkeley. Her interests in start-ups and emerging technology companies led to join BRB’s investing column. Outside of BRB, Joyce’s interests include painting, jogging, playing the violin, watching movies and reading books. Joyce also enjoys exploring different restaurants. She loves sushi and hotpot the most.