The COVID-19 pandemic has had a huge impact on the real estate market. It is a reality that quite a few people have to face on a daily basis. From chief executive officers of big corporations and real estate developers to small business owners and investors. In fact, many ha to switch to different investment strategies for real estate post COVID. This was to deal with the economic fallout of the entire situation.
In addition to that, investors are facing new challenges as countries around the world are emerging from lockdown restrictions. One of the greatest challenges out of the bunch is soaring inflation rates. According to the International Labor Organization, a United Nations agency, inflation more than doubled from the rate of 3.7 percent in March 2021 to the rate of 9.2 percent in March 2022. Energy costs are soaring, too, and labor shortages worldwide are getting worse.
So, how are such economic trends affecting real estate investing? And what does it mean for the rental property market, in particular? Nobody knows what awaits the real estate market as a whole after the pandemic. However, it is safe to assume that investing in real estate will remain as profitable as ever. Here is why that is the case.
The pandemic made people feel uncertain about the future, and not just the investors. With shelter-at-home orders around the world came the inability to do even the mundane things. For example, going out for a walk, visiting a family member, or making a trip to the grocery store.
What is more, millions were made redundant or saw significant decreases in income. This resulted in rent being tough to pay for countless tenants. To prevent yet another economic crisis, multiple eviction control measures were put into place on a federal level.
According to real estate experts at Springboard To Wealth, such measures did help to prevent insolvent tenants from being evicted. But, this also had a largely negative impact on mom-and-pop landlords. This meant many of them were struggling to pay property taxes and mortgages.
Due to the fact that fewer evictions were taking place, open units became a scarcity. According to a recent report on how the pandemic affected the rental market in the United States, rental listings were down twenty-six percent in the first half of 2020. This is in comparison to how things were just a year prior. Aside from that, home sales transactions in big metropolitan areas fell by fifty percent. Additionally, average sale prices declined by eighteen percent.
It is also worth noting that certain sectors of the real estate investment market were hit much harder than others. To give an example, the travel industry fell into a pandemic-induced slumber, with fewer people going on holidays amidst travel restrictions. As a result, real estate investors were not that interested in hotels. Investing in a hotel at the height of the pandemic posed a much greater risk in comparison to investing in a residential property.
Much of the pressure on the real estate post COVID has decreased in recent months. But it is still hard to tell what the market will look like once the pandemic is over. It also begs the question of what real estate investments one should focus on at that point.
While it is not easy to predict what will happen, here are a few real estate investment trends that might be worth keeping an eye on post-pandemic.
The term built to rent refers to a property development designed to appeal to the rental market instead of long-term homeownership. What makes it a worthwhile investment is the fact that renting is on the rise. The reasons for that are simple.
First, the prices of properties are soaring, and fewer people are willing to deal with paying off hundreds of thousands worth of loans. Second, the attitude towards renting has become more positive in recent years. Thus, owning a home is no longer something that some are striving for. It all creates a great business opportunity for real estate investors, big and small.
In spite of eviction moratoriums, residential properties performed relatively well throughout the pandemic. Tenants received rental aid assistance, which kept that kind of real estate investment appealing to investors. It also prevented evictions, and fewer evictions helped to keep the rental market tight.
Moreover, eviction moratoriums did not wipe the slate clean with rent debts. This means that landlords who were not paid rent during the moratorium period will still be able to collect what they are owed. All that is a sign that investing in residential real estate is likely to remain lucrative post-pandemic.
The owners of retail and office properties did not do that great during the pandemic. As more and more people started to work from home, numerous office spaces were deserted. Nevertheless, the complete shift to remote work never happened. It appears highly unlikely that it will, with multiple companies urging workers to come back to the office. For that reason, retail and office properties are likely to end up being a profitable investment in the post-pandemic world.
To sum up, the COVID-19 has impacted the real estate industry in a number of different ways. It cut into the profit margins of real estate developers and made people much less willing to buy properties, among a number of other things. In spite of that, investing in real estate after the COVID-19 pandemic is over is not a bad idea. It all depends on what you are interested in and how much time and money you are willing to put into real estate investing.
For instance, if you have a large sum of money lying around, you could invest it in commercial real estate post COVID, such as a big office building. Alternatively, investing in smaller rental properties is always a viable option. All in all provided that you know what you are doing and avoid rushing into it blindly, the investments listed here are likely to yield significant returns.