The popular saying “there is no place like home” might not have the same warmth to it these days considering how long people have been cooped up in their homes because of the coronavirus pandemic.
COVID-19 though, will do more than change how people look at their homes as it has the likelihood to alter property markets all over the world. With the rampant unemployment, wage cuts, business closures and job uncertainty, it is a near certainty that people will be hesitant to invest whatever money they have in purchasing a home.
These elements usually result in a drop of house prices, which we all saw during the last recession in the UK, US and other countries. In the UK, the Nationwide house price index showed that prices fell 1.7% from the previous month, which happened to be the largest drop in over a decade.
Robert Gardner, the Nationwide’s chief economist, stressed, “there are some signs this is starting to stabilize.” He also explained that the current conditions is not just a normal economic downturn.
Instead, the UK government, as with many all over the world, made the decision to place the economy on hold. This happened at the same time as establishing numerous measures to support households and businesses, like the worker furloughing scheme.
The hope is that as lockdown restraints continue to be taken off, economies and housing markets will bounce back.
In the US, house prices are still on the way up.
“Many areas have put a moratorium on evictions, normally for 60 to 90 days, but in some areas for six months,” explained Prof. Nori Gerardo Lietz, who teaches real estate investment at Harvard Business School.
This means that the direct concerns have been placed on the shoulders of landlords and the banks, which isn’t to say that there won’t be any more difficulties further down the line especially as the US unemployment rate remains up there since the coronavirus lockdown.
However, behind those figures, there are other elements in the property industry. Many people have suddenly realized that they can work from home and avoid the commute and the office, and this is impacting the market. This is because of the success that a lot of people have had working from home, will offices be as busy as before?
Rightmove, which is a property website based in the UK, has indicated a substantial increase in people looking for homes that are away from town and city centers with bigger gardens and space that can be transformed into an office. Now, this may not be a permanent change but the health crisis has allowed people to think about making changes to where they work and live.
In the US, the problem is slightly different. As land is so cheap, and planning permission so easy to get, there is a long practice of retail parks and malls just being discarded if they are not making money, or cost too much to upgrade. The impact of coronavirus could see this trend increase.
For office space providers, if coronavirus ends up becoming a one-off hit, with just two quarters of rents deferred, there is little reason for property values to be affected at all. But instead, coronavirus might actually have a huge influence on the sector. After all, if the housing market changes as people look for more suburban and rural properties where they can work from home, there will be less need for office space to work in.