The current coronavirus crisis is devastating economies all around the world. In practice, it means that many industries are being hit hard, including real estate. People are much more cautious these days about what they spend their money on and how. So what does this mean for real estate investing?
Is it safe to invest?
Compared to other types of investment, real estate is a stable way of investing in the long-term. Stocks, for example, are much more volatile and sensitive to external turbulences such as a crisis.
We can look back on recent past pandemics and see how they influenced real estate markets. Both SARS and H1N1 resulted in short-term turbulence. But if we consider long-term effects, in both cases real estate markets became stable again within a couple of months.
This fact is also supported by the latest forecast from Savills, a global real estate advisor. The forecast predicts that European real estate investment activity will fall by 50% before it will rebound quickly within the next 12 months. Also, Knight Frank’s COVID-19 report, which focused on the UK property market, indicates similar results.
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What does it mean for real estate crowdfunding?
The majority of the real estate market is shifting online these days. This works well for the real estate crowdfunding industry, which takes place entirely online and doesn’t involve any middlemen.
The coronavirus crisis means that people will likely have less money to invest with, and won’t be able to afford expensive properties outright. In the case of crowdfunding, investing can be done with as little as €100, so there will always be room for it. Also, as banks tend to reduce their financing of new developments during crises, we can expect an increase in demand for alternative financing methods, such as crowdfunding.
What the future of investing could look like?
Emerging technologies such as big data and AI are gaining a bigger and bigger role in real estate investing. Investors will be able to get deep insights into property prices, trends and possible market developments.
Every past crisis has resulted in greater efficiency. From the perspective of the current economic climate, we see an increased rate of digitisation, which is going to further accelerate moving real estate investing online.
This article is based on two separate articles published on PropertyWire, where our CEO and co-founder Jan Večerka discussed this topic.