The impact of economic and financial crises on the real estate market

Since the onset of the COVID-19 pandemic the most common questions that have been surfacing over the past months are; What is the impact of the current economic crisis and recession on the real estate market? And as a result, will real estate prices drop?

Due to everything taking place throughout the world right now, we are witnessing uncertainty and chaos throughout the global economies. The last couple of month have seen stock markets collapse and currency values fall; along with unprecedented worldwide restrictions of travel there has been a deterioration of consumer spending and sentiment thus it’s no wonder that existing and potential investors in the real estate market are worried and want to minimize their risk more than ever.

Real estate in a time of recession.

When a global recession happens, investors should not generalize the economic effect this could have on real estate worldwide. For example, in the last recession in 2008, the US was affected much more severely than the Middle East or Africa. Therefore, when investing in real estate, it is important that investors are reminded of the importance of treating each business case separately; the specific country, city, property type, or neighborhood will vary substantially as not every country gets impacted equally. While most of the world will now be overwhelmed by the turmoil of this current crisis, the proactive investor will be looking for the opportunities and deals in every market. The successful investors who know how to ride-out a recession will never sit on the sidelines, but rather know how to recognize the scope of possibilities and seize the opportunities.

Real estate is the safe haven and best alternative.

If you previously considered that investing in real estate is risky, then where else would you decide to invest at such a time? With the current volatility of the stock markets it is not clear who will be impacted and with governments weighing in to try and prop up their private sectors, investors should think very carefully before investing in the stock market at this time. When the stock market is not performing well, real estate is a beacon of safety.

In an attempt to exercise caution some will opt to do nothing; however, this will cost them! Locking up money in your bank account will keep you exposed to the risk of inflation, real estate however is known as being ‘inflation proof’. Furthermore, the real estate market has grown consistently through recessions and has proved to be much more stable when compared to performance of market indices which have historically displayed much more volatility.