The global shutdown in response to the coronavirus pandemic is going to have big effects on property markets worldwide. In the wake of the 2008/2009 global real estate crash, some countries — including Spain, Ireland, and Costa Rica, for example — saw property prices fall by as much as 70% or more. Those bonafide collapses were thanks to bubble pricing and over-lending. Markets with less leverage at work—Panama was the best example—saw far lesser drops in values and quicker recoveries.
What’s going to happen this time?
Every property market worldwide will be affected by the pandemic crisis but not all negatively. The “survivalist” market—for properties in places where you could live comfortably off-grid and self-sufficiently—will become more sought-after than ever and therefore more valuable.
Thinking long term, the world’s brand-name markets will be least impacted. Long term, a Paris rental property will always find a renter. Even though this top-tier rental market will also take a short-term hit.
Before the quarantine, prices in Paris were soaring. Thanks largely to Brexit pushing trickles of financial industry workers from the City of London to the City of Light. Few listings have been withdrawn during the extended lockdown, but very few new properties have come onto the market. When Paris reopens, however, there will be a surge of new listings, creating a short-term softening and a buyer’s market window.
Vacation Rental Markets
Hardest hit will be second-home apartment and beach-home villas. These will collapse in the immediate term. At the top of this list are markets like Cancún and Playa del Carmen, Mexico, where zero tourist traffic will kill rental returns and lead to depreciating values of 50%.
High-density cities, likewise, will see collapses in their property markets, as well, as demand across the board—residential, tourist, and commercial—will diminish. Think Rio de Janeiro.
Vacation and second-home markets, in general, will rebound slowly. Interest will pick up as air travel returns. But it will take 5 to 10 years for meaningful recoveries in some cases. As these markets will be hardest hit, they’re the places to shop for crisis-level bargains. Just be prepared to invest for the long term, and, very important, buy in a place where you’d enjoy owning and want to spend time.
Livable Low-density Cities
The world’s most livable cities with modest to small populations will recover quickly and see booms as people look for options for reinvention and starting over in locations that offer a good and affordable quality of life and relative safety from a new pandemic. The possibility of another COVID-19 crisis will be on all our minds for a long time. Thus, small cities and rural areas offering the possibility for an appealing yet physically distanced living will enjoy growing demand. Bristol in the UK, Boulder in the US, Medellin, Colombia, and Cuenca, Ecuador, are good examples.
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