Real estate remains a popular pick for investment. Here’s what you need to know about downturn shopping


The pandemic of coronavirus has made us all even more familiar with our homes. But it has also raised a number of concerns about the property market ‘s future.

While global markets were thrown into turmoil in the early days of the outbreak, the property market has remained resilient broadly speaking. As of April, an annual median U.S. house price rose 8 per cent to reach $280,600.

To investors this is positive news. Real estate continues to rank as the top investment choice for most Americans (35%), ahead of stocks and bonds (21%), savings accounts (17%), and gold (16%).

But the coronavirus has shut down construction sites worldwide, adding to existing shortages of supply. And the phrase “safe as houses” has been shaken with many industries and individuals now facing uncertain futures.

CNBC Make It spoke to the experts to find out what the future of real estate might look like.

Buy a house

Buying a home is often considered one of the most significant and prudent financial investments that you can make.

That conventional wisdom can be called into question during times of economic distress. The global financial crisis of 2008, which originated on the property market, has been a big knock on trust. Financial experts have broadly agreed, however, that this downturn will not hurt housing the same way.

“The property market has either remained relatively resilient in most recent recessions, or has only been impacted in some real estate sectors,” noted Dhruv Arora, CEO of digital wealth manager Syfe.

Real estate remains a popular pick for investment. Here's what you need to know about downturn shopping
Close up a young man who pays his billsGeber86

Despite the short-term challenges of undertaking in-person viewings, this means that it is now a fair time to think about buying a home until cities and states are reopened.

With interest rates slashed in a bid to stimulate global economies, borrowing costs have become lower, potentially making mortgages more affordable for those with sufficient finances. The same is true of refinancing an existing home.

Trent Wilshire, economist at Australian property site Domain, said more people could be encouraged to return to the market. It is already beginning to happen in Australia, where it is easing lockdown measures, he noted.

“In the coming weeks, transactions will start to rise again, but are still likely to be sluggish compared to the late 2019 / early 2020,” he said. “In recent weeks we’ve already seen a pick-up, with new ‘for sale’ listings rising over the past few weeks and rising domain inquiries from potential buyers.”

That being said, the existence of the coronavirus pandemic remains unknown, so it is important to look at the details of the city’s local and national market you ‘re looking to purchase in.

Buy-to-let own land

A buy-to-let property will provide a great source of passive income through rental payments and development of capital through price appreciation. It can also offer an alternative route for first-time buyers on the property ladder, who are unable to buy in their preferred area.

In today’s world, those fundamental qualities remain valid. Indeed, the economic slump has likely exacerbated existing trends, pricing many young people out of buying and inflating the market for renters.

That offers those in a position to invest the opportunities. But with the global economy on the rocks, so is the demand for rentals too. Prospective landlords should be careful that some tenants may find themselves struggling to make their payments.

“This is all about location. The strongest investment prospects should be in those countries where the least affected labor market is, “said David Lebovitz, JPMorgan Asset Management’s global market strategist.

Buy-to-let properties, as with residential homes, are currently suffering the same logistical hurdles in terms of viewing and processing sales.

Commercial Immobilities

Commercial real estate, which includes the hard-hit hotel and retail markets, poses potentially the greatest danger to investors.

The commercial real estate market has declined by nearly 28 percent so far this year, with hotels & resorts and retail spaces dropping by 48 percent and 40 percent.

Arora of Syfe said the drop-off would take some time to rectify. That recovery is likely to be “gradual”-or U-shaped rather than V-shaped-as economies embark on phased reopenings, he said.

Real estate remains a popular pick for investment. Here's what you need to know about downturn shopping
Marina Bay Sands Mall in Singapore, SingaporeInti St Clair Republic

But there are also opportunities where there are downsides, Arora noted.

“As always investors will be looking at the long-term value of these real estate industries,” he said.

Sectors with “strong fundamentals,” like industrial , residential, and specialized real estate, are showing particular signs of resilience, Arora said. Meanwhile, China โ€” initially at the forefront of the outbreak and now leading the economic reopening push โ€” provides indications as to which sectors were booming under the pandemic, mainly health care and logistics.

“We still see value in direct real estate as a source of income, and more broadly as a diversifier of portfolios,” Lebovitz added, highlighting direct purchases and investment trusts (REITs) as some of the best options.

“We believe it’s about combining REITs and direct real estate, especially as REITs are more exposure to more forward-looking sectors,” he said.

Foundation building

It is necessary to get the foundations correct before we embark on any financial investment, real estate or otherwise.

Financial advisors usually recommend that you set aside nearly three months’ salary in cash to tide you over in case of an emergency. However, according to personal finance expert Ramit Sethi, six months’ worth could be a safer bet in the current economic environment.

“An emergency fund is a saved money for any unforeseen expenses. It gives the mind knowing you’ve got a hedge against the worst financial disasters, “he writes in his blog” I’m going to teach you to be rich.

In addition, it is critical that additional funds be set aside to cover the legal and transactional costs associated with purchasing a house.