Coronavirus: Impact on the Real Estate Market

You may have heard that the Federal Reserve just cut interest rates from 1.75-1.25 percent (50 basis points), to bolster our economy and counter the effects from the coronavirus scare. This is the first time this emergency action by the Federal Reserve has occurred since the 2008 crisis.

The Fed is hoping the rate cut will boost consumer confidence after U.S. stocks plummeted last week. A measure of real estate stocks called the SNL U.S. REIT Equity index fell about 12.3 percent, according to S&P. The hotel industry and hospital industry have also been hit hard.

There was an article in The Washington Post by Kathy Orton on Jan. 6 that was extremely informative in depicting and predicting how the real estate market will perform in 2020. The National Association of Realtor’s senior economic advisor, Lawrence Yun, had some pertinent thoughts on our market and where it would be heading this year and I quote from the article:

“The National Association of Realtors trade association for real estate agents predicts moderate growth in the housing market and continued low mortgage rates,” he said. “New-home sales are expected to rise to 750,000, an 11 percent increase that puts them at a 13-year high. Existing-home sales will continue to be held down by lack of supply, rising modestly to 5.6 million, a 4 percent increase.

“The national median sale price of an existing home is expected to grow to $270,400, an increase of 4.3 percent from 2019,” he said. “In 2020, more home-building activity and consequent growth in supply should tame down-home price gains. That’s a healthy development for potential home buyers. Southern cities should once again do better than most other markets.”

The 30-year fixed-mortgage rate will remain below 4 percent in the coming year, moving to 3.8 percent by the end of 2020.

“Interest rates will remain low, as long as we have government backing of mortgage-backed securities,” Yun said. “But mortgage rates may increase as inflation kicks in and economic activity markedly picks up.”

More Information: Washington Posts "Experts Predict What Housing Market Will Bring."

The latest figures as of February 28 show more than 83,000 reported cases of the coronavirus in at least 53 countries, with more than 2,800 deaths globally. Tourism is way down in China and several retailers and shopping malls are closing their doors.

Here are some international real estate headlines:

Restaurant operators in Singapore have asked for rent rebates.

CapitaLand announced relief measures to help tenants on February 23, including a S$10 million marketing assistance program to fund retailer-driven & mall-wide promotional activities to help its tenants, flexible rental payments and a one-time rental rebate of up to half-a-month for eligible tenants, and a commitment to pass on full savings of government’s property tax rebate for qualifying commercial properties to its tenants.

Frasers Property unveiled its tenant support package on February 24 across its 14 malls in Singapore, which includes the Budget 2020’s 15% property tax rebate and allowing tenants to convert security deposits paid in cash to banker’s guarantees, an announcement revealed.

In Hong Kong, a few landlords such as Sun Hung Kai Properties and New World Development have offered rent cuts in February, but tenants are looking for a complete waiver.

Singapore: real estate companies freeze wages

CapitaLand became the latest company in Singapore to implement a pay freeze due to Covid-19, saying board members and senior management will take a reduction in their fees and base salaries ranging from 5% to 15%.

More Information: Forbes "Coronavirus Impact on Real Estate Companies in Asia."