Coronavirus could have a significant impact on real estate markets.

The adage “there is no place like home” may not be as heartwarming these days.

After all, most of us have been cooped up in our homes or apartments for an extended period of time.

The coronavirus pandemic, on the other hand, will do more than just modify our feelings about our dwellings. It has the potential to have a significant impact on global property markets.

With widespread unemployment, salary cuts, business failures, and job instability, it is understandable that many individuals may be wary of making the largest investment of their life – purchasing a home Karaikudi.

Normally, this results in dropping housing values, as we saw during the previous recession and credit crunch in the UK, US, and many other nations.

People are holding off purchasing a new home because of the economic uncertainty posed by the coronavirus.

In the United Kingdom, the Nationwide house price index for May revealed a 1.7 percent drop from the previous month, the greatest drop in 11 years.

However, as Nationwide’s senior economist Robert Gardner points out, “there are some signals that this is starting to stabilize.” He goes on to say that this is because the current circumstance is not typical of an economic crisis.

Instead, the UK government, like others around the world, deliberately decided to halt most of the economy. At the same time, a slew of initiatives to help homes and businesses, such as the worker furloughing scheme, were put in place.

When a result, the hope is that as lockdown limitations are gradually relaxed, economies and property markets would recover.

House prices in the United States continue to rise. “Many sections [of the country] have put a moratorium on evictions, generally for 60 to 90 days, but in certain locations for six months,” says Harvard Business School professor Nori Gerardo Lietz, who teaches real estate investment.

This means that the immediate troubles have been shifted to landlords and banks, but it does not rule out future problems down the road. Especially since the coronavirus lockdown, the US jobless rate has remained sky-high – 13.3 percent in May, albeit down from 14.7 percent in April.

However, there are additional dynamics at work on the property market that are not reflected in the headline data. Many of us have discovered that we can work from home and avoid commuting and going to the workplace, and this is already having an impact on the market.

Will offices ever be as busy as they were before the shutdown, with many of us successfully working from home?

According to Rightmove, the UK property website, there has been a considerable increase in the number of people shopping for properties further away from town and city centers, with larger gardens and space for a home office. This may not be a permanent change, but the coronavirus has made many individuals reconsider how and where they work and live.

The changes in the commercial property sector are even more significant, particularly on the UK’s High Streets.

“Retail [in the United Kingdom] has had issues for a long time,” says Prof Michael White, a real estate economist at Nottingham Trent University. “At the moment, salaries are certainly being impacted by furloughs, and in a recession, there will be a squeeze on expenditure.”

It implies that what we saw before the virus struck has accelerated – many High Streets have been degrading for years. And now that many more of us have learned how much we can buy online, the rate of growth will only accelerate.

Another difficulty is that, prior to the coronavirus, the trend was already toward fewer stores on the High Street and more services – items that cannot be obtained online – such as cafes, hairdressers, and beauticians

“The twist is that these services have been hit, so we have seen a halting of a growing trend,” says Prof Andrew Baum, director of Oxford University’s Said Business School’s Future of Real Estate Initiative.

Many UK high streets were already suffering prior to the shutdown.

This implies that High Streets have been impacted twice as severely – numerous retailers have closed, and face-to-face service providers have nearly all closed.

As a result, rent arrears have increased. If landlords are only missing or postponing one or two-quarters of their rent, this is not a major issue for the sector.

However, if this is the start of a long-term trend, it will generate problems and possibly a drop in the capital value of many retail properties, possibly by 20% -30%, according to Prof Baum.

The problem is slightly different in the United States, where there has been a comparable tendency in the retail industry. Because land is so cheap and planning approval is so easy to obtain, retail parks and malls have a long history of being abandoned if they are not profitable or cost too much to update. The influence of coronavirus could accelerate this tendency.

“The problem with retail in the United States is not that it is overbuilt, but that it is under demolished,” argues Prof Gerardo Lietz.

According to Nori Gerardo Lietz, anticipated issues in the US home market have been postponed.

If the coronavirus turns out to be a one-time event, with only two-quarters of rents delayed, there is little reason for property values to be affected at all.

Instead, coronavirus may have a significant impact on the industry. For example, if the housing market shifts toward more suburban and rural properties where individuals may work from home, there will be less demand for office space.

As a result, the office property market will have to adapt, something Prof White believes the business is quite excellent at.

He argues that when inflation is factored out, “average rents in London are the same as they were 100 years ago.” He claims that this demonstrates that the office property market has been very good at matching supply and demand for a very long time.

In the 1950s and 1960s, when the UK capital required more offices, many of the West End’s townhouses were converted from residential to commercial usage. The City of London was renovated in the 1980s, with skyscrapers rising, and Canary Wharf was created in the 1990s on London’s former docklands.

Buildings, particularly office blocks, have recently been converted back into flats and apartments as London has needed more housing.

In the United States, old shopping malls are frequently demolished.

Even in these quickly changing times, the housing market has two things working for it.

The first is that even if home prices decline, it may still be a good investment. This may seem counterintuitive, but property is a long-term investment that is both secure and pays a good return Karaikudi.

So, even if government bonds pay 0.5 percent or less in interest per year and property earns 3-5 percent, if you are a private investor or global investment fund, you still have a good source of income.