What the Real Estate Industry Needs to Know About the Corona Outbreak
The most important news and articles summarised in the Archilyse Corona-Real Estate-Reader
Wherever we look at the moment the topic of the Coronavirus is omnipresent.
We have scoured the jungle of media releases and summarized the most important findings, articles and expert opinions for the real estate industry in our Corona-Real Estate-Reader.
JLL does not see long-term damage for the real estate industry
Jones Lang LaSalle (JLL) does not see the impact on the housing market to be not too drastic. JLL expects that the persistently low-interest rates will continue to ensure a constant demand for residential property.
Although fewer viewings and purchases are expected in the current situation, if conditions ease again, they are expected to rise again strongly. The low-interest rates should ensure that owners will be able to repay most of their bank debts.
The experts do not assume that the real estate market will suffer long-term damage from the COVID-19 crisis. The value drivers of real estate are rental incomes from tenants of all sectors, and not all sectors are affected equally.
It is possible that the spread of COVID-19 will accelerate the use of robots and artificial intelligence in businesses and reduce dependence on labor.
There is no doubt that it will trigger a push for digitisation in many companies.
Read the full report here
Wüest & Partner forecasts far-reaching changes
Wüest & Partner’s forecast is more adverse. They expect COVID-19 to trigger a recession in Switzerland. In order to halt the spread of the coronavirus, all activities will be scaled down and demand for space will drop.
Accordingly, a short-term increase in unemployment is also to be expected, especially in those economic sectors that are strongly affected by the current measures.
Depending on the sector, the consequences will be stronger or weaker: however, there will be temporary negative effects for all segments.
Looking back at past developments, the construction industry has been blessed with economic growth and a significant increase in employment in the last decade.
If the pandemic will weaken, bringing the temporary changes in the real estate market back to normal. In the long-term, this could lead to the following (structural) changes:
- Various opportunities will open up for health and hospital properties, as the need for care and security will grow.
- Stockpiling will become increasingly important compared to just-in-time production, making storage and logistics space more important.
- The long-term increase in the number of passengers using public transport during peak hours could level off. Where possible, more emphasis will be placed on individual mobility, such as e-bikes.
- The reflection on beautiful places in the immediate surrounding awakens the preference for holiday and leisure activities near the place of residence. This strengthens the domestic market and the demand for second homes in Switzerland.
- The structural change in retail is accelerated. E-commerce is rapidly gaining further market share at the expense of stationary retail.
- Privacy and retreat opportunities could get a new boost. In residential use, a high quality of stay, but also private retreat opportunities are likely to become even more important.
Read the entire report here
The real consequences of COVID-19 will only become fully visible in the following year. (Photo credit: Raphael Koh, Unsplash)
The Swiss Baublatt shows possible outcomes: Economic shock or growth
The Swiss journal Baublatt also predicts that the consequences of the coronavirus will not leave the real estate market unaffected, citing experts from the federal government, banks and forecasting institutes.
According to their estimates, the corona epidemic will lead to a recession. But because the epidemiological developments are so uncertain, different scenarios about the consequences of the economic downturn are conceivable.
One possible variant is that the spread of the virus at home and abroad will temporarily shut down certain sectors of the economy completely, thus triggering an economic shock. Credit Suisse, however, only expects a short-term economic downturn. It predicts that the current exceptional situation could last until mid-May and then gradually ease.
If in the course of 2020 the virus is contained, Credit Suisse predicts that growth could even pick up strongly towards the end of 2020 thanks to catch-up effects. As a result, Switzerland’s GDP would also grow again in the second half of the year.
However, the extent of the virus spread in Switzerland and other countries, as well as its temporal course, is difficult to estimate. Accordingly, the forecasts should be treated with appropriate caution. However, one should be prepared for all scenarios.
The experts consider it inevitable that Switzerland will have to deal with higher unemployment in the coming months.
As a result of the great uncertainty and falling occupany, many companies are sending their employees on short-time work or shutting down completely.
Read the German article here
The Handelszeitung draws parallels to the financial crisis in 2009
The Handelszeitung takes up the opinion of economists at UBS, who expect that a recession as severe as the one experienced in 2009 will lead to heavy write-downs of real estate in some cases.
However, a distinction must be made between the different types of real estate. Back in 2009, massive interest rate cuts by the Swiss National Bank and an increase in immigration triggered a strong surge in demand for real estate. However, no major fluctuations or only moderate price declines are expected in house prices.
According to experts, luxury properties will be harder to sell in the long term though. This is because liquidity will fall in the event of a severe recession, so thus vacancies will rise even more.
Read the entire German press release here
Haufe shows how the construction industry in Germany is doing
Despite the corona epidemic, construction service providers and craftsmen are currently allowed to continue their work in Germany. However, the restrictions in public life in connection with coronavirus prevention have a strong impact on construction.
Some construction sites have had to close down due to official orders to protect against further spread of the virus.
This is having an impact on businesses, which is reflected in the increasing number of applications for emergency government aid. This is because if orders are lost, this places a considerable burden on companies in the construction industry.
However, the German government is discussing a rescue fund with company participation and has already decided to expand credit programmes in order to secure the liquidity of small and medium-sized companies in the corona crisis.
You can read the German article here
We will shortly be starting an interview series featuring personalities from the real estate industry.
They will talk about how their companies are dealing with and assess the current Corona situation.
They share insights because they want to promote the exchange in the real estate industry, and encourage others to stay strong in this challenging time.