“After a storm comes a calm”, goes the old saying. Most European jurisdictions are slowly starting to ease lockdown restrictions and eventually moving towards recovery. First and foremost comes health and saving lives in the community. Once the pandemic starts fading away, the economy has to be rebuilt. From an economic point of view, I need not remind my readers what a devastating world we are now going to find when things start moving back to somehow pre-pandemic days. But more than a devastated economy, the entire community is going back to a rather different world.
There is no question that we are all, at least in Europe, America and parts of Asia and probably the rest of the world, in a similar kind of boat where reconstruction of the economy has to follow up once the health problem is under control. This pandemic is arguably the worst calamity the planet has encountered since the two great wars of the last century. Some countries in Europe have reported well over 25,000 casualties, but it has been assumed the real numbers could be substantially greater than that. The US has way surpassed those figures by more than double and the end does not seem to be anywhere close.
The economy has to be rebuilt.
Times are not going to be easy after the pandemic. As mentioned in my previous article, there will be a large amount of companies that will not make it back. Many companies, big and small, will not be able to find a way to recovery whilst some others might, or in some cases even do better than before. Taking into consideration the property sector, how will all this affect the global housing and residential markets? Will property prices go into a second downturn as with the crisis of 2008? We shall concentrate on how to make the best of the worst in the near and not so near future. Strategies to follow and different options that may come up in the form of different scenarios.
The property sector has several different market areas including the residential or housing market, which will be affected to a greater or lesser degree depending on each particular market and jurisdiction. Then we have the commercial and industrial property markets, which again will be affected in one way or other. Then we have the land and country estates market which could have two different sides to the story. On the one hand, we have the future development land market, which may see a decline in its prices. The country estates and farmland may possibly be a totally different story. If farms produce the right products in order to supply the food chain, they could very well be a safe option to invest in. There could be some very drastic changes in the food supply chain. At present you can see fewer imported products than three months ago, for instance. We are not saying exports and imports will cease to flow in and out of Europe and other continents but it could very well be the case that people start consuming their local produce, which is sometimes pricier but often of better quality and easier to get if restrictions continue to be the norm. I have several acquaintances in France, Ireland Portugal and Spain that have seen their farm products soar up to the clouds as far as sales are concerned. There are interesting investments to be looked into in farming land. The secret is simple: Buy wisely and negotiate the conditions so you bag the right deal. It is a buyer’s market no doubt.
Will property prices go into a second downturn?
The residential housing market is a horse of an entirely different colour, which will need a very careful approach if your idea is to invest in the short to middle term. This is not a banking crisis like the one of 2008, but it is much more like after war economics. Money is surely going to be available, but the question is, for what purpose? Banks had a very challenging and difficult position during the last recession and a lot of them got into extremely difficult times. Some of them no longer exist due to their very poor financial performance over years. They were bought by some large funds or taken over by larger banks, so the investor may not be able to count on large amounts of money to finance property investment acquisitions. The question of ‘To have or have not’ is of paramount importance in the aftermath of the pandemic. If the investor has the resources it is going to be quite possible that he can make some extremely interesting acquisitions at bargain prices. There will be people that cannot afford to pay off their mortgage loans, others no longer wish to have the financial burden and prefer to clear up their loans and remain with net and positive property portfolios no matter the size. In addition, some large companies that were doing well in pre-pandemic days and have a stony path back to recovery will most likely be willing to lay off bricks and mortar assets and move on to more positive areas in their view, like their own companies that supplied the funding out of their hard earned profits to buy property in the first place. Any investor of property who knows the market should be well aware of this and on the lookout for the right property stock.
The question is, for what purpose?
A major estate agent from the Golden Mile of Marbella wrote to me some days ago. He runs the oldest estate agency in town, with 50 years in the trade. He was talking about reductions in luxury property in Marbella of between 10% and 40%. Let us take 25% reduction as an average example. That is a quarter of the sale price of two months ago. You could do very well if you are able to produce the funds. Banks will consider lending to prime customers with plenty of collateral and proof of sufficient income as anywhere else. But if you have the money just invest it and you will see your investment flourish in the near future.
Business in property is no different from the stock market. To make decent money you have to buy when the market is low and attractive. The good news with property is that you can see it, touch it, use it, rent it, lend it and flip it over at a profit when the time comes. And most important of all you are in total control. Not always the case with other investments. The aftermath of the pandemic is going to offer some tremendous opportunities as far as investments in the property sector are concerned.