June 1, 2020
With the world still figuring out how to navigate its way out of Coronavirus and the on-going economic turmoil, I’ve been thinking about what will happen in the Real Estate (RE) market. With rising unemployment and people still debating over whether to keep economies locked down or not, we’re surely set to see some price dips in both Commercial and Residential RE.
Leading into this pandemic, RE had been the asset class of choice for those investors seeking yield, a trend that had been on the up for the last decade. This demand for yield, coupled with cheap money and low supply, pushed asset prices to new highs…so high in fact, that a new crisis emerged – the ‘affordability crisis’.
An article by Bloomberg from November 2019 looked at affordability in California and some of the stats were eye-opening. I pulled a direct quote which highlights the challenge in this space:
In a state where more than 40% of residents are considered cost-burdened for housing—paying more than 30% of their income toward shelter—even people in high-income brackets are often stretching their budgets.
We weren’t in great shape coming into this thing and now, the stage looks set for some big shifts in the global RE market.
James Kouzinas
