Real estate is a key measure of economic wealth. The real estate sector is the same as other markets where it is affected by crises, especially COVID-19 virus which the world is still suffering from its negative effects, that have affected most fields and sectors, and its impact has appeared directly on the economic sectors. With that emerging crisis, do you think the real estate sector will be affected by the same speed as other markets?  Do you find that rent in crisis is losing to the tenant?  This is what we will get to know in this article, keep reading.

 

Real estate market

Real estate market

As we said that real estate is essential in economic wealth in the world, especially for the GCC. 

 

From 2003 to 2008

From 2003 to 2008

As investment in the GCC, especially investment in real estate, grew from 2003 to 2008. Saudi Arabia and the UAE accounted for 82% of the total foreign direct investment that the GCC attracted. 

 

2008 & 2014 

2008 & 2014 

Let’s go back and remember the financial crisis that occurred in the region in 2008 and the decline in oil prices in 2014, which led to a 40% drop in real estate prices and rents, and the emergence of many challenges,  leading to a decline in demand for real estate in the Gulf Cooperation Council countries and resulted in investor sentiment in the GCC to plummet. 

 

Over the past years

Over the past years

The need for both commercial and residential real estate has increased as a result of the influx of expatriate people into the Gulf countries and the rise in per capita income.

 

Do you think that the real estate sector will be affected again rapidly or not? Of course not, the real estate area, especially the residential sector and REITs investing in the residential sector comes after many sectors such as the stock market, gold, oil, and currencies. But what do epidemics have to do with rising and low property prices and the housing crisis?

 

Real estate is a market commodity that is affected by all economic and political crises but will not reach the stage of collapse, as the market needs more properties so that there is a balance between supply and demand.

 

Real estate indicators in the Gulf countries after the Coronavirus’s outbreak:

Real estate indicators in the Gulf countries after the Coronavirus’s outbreak:

  • The average value of each real estate transaction in the Gulf countries decreased by 4.1% on an annual basis.

 

  • In the residential rental market in Dubai, rental rates have decreased by 1.5%, and the rental market is expected to have challenges and obstacles in the short term as a result of the Covid 19 crisis.

 

As for purchasing decisions, they may be delayed due to the “psychological effect” of coronavirus, despite falling interest rates. But there are many expectations to see continued flows of capital into real estate over the medium to long term.

 

Crisis response in GCC 

Crisis response in GCC 

In general, knowing the actual effect of COVID-19 on the real estate sector is highly dependent on the period for the continued spread of this virus, and the overall response to control it.

 

This is some of the Gulf countries’ responses to Coronavirus:

This is some of the Gulf countries’ responses to Coronavirus:

Arab governments, especially in GCC, took some time before assessing the seriousness of Covid-19 and taking steps to mitigate its spread. But once they saw the effects of the epidemic on other countries, they undertook measures of isolation and containment, which included closing borders, canceling flights, stopping airlines,  home quarantining, closing places of worship, banning collective prayers, suspending work permits for foreigners, and repatriation of tourists to their countries. A curfew has also been imposed. For example:

 

Bahrain

Bahrain

As part of its response to the Coronavirus rent crisis, The Bahraini government has reduced interest rates, restructured loans, subsidized salaries, reduced rents, provided grants, and eased service bills for commercial projects for three months starting April 2020.

 

UAE

UAE

Usually, early termination of leases typically enters a two-month rent penalty. But in the outbreak of the Coronavirus, many private landlords in the United Arab Emirates have stopped applying the terms of penalties for lease contracts. The decision came after many tenants lost their jobs and returned to their country.

 

Real estate Investment in GCC

Real estate Investment in GCC

Steady income from rental returns is what attracted investors to the real estate market in the Gulf region.

 

– Investors in the GCC continue to receive a rental yield of over 6% compared to mature markets in the United States and Europe.

 

– UAE has higher rental returns than most popular real estate investment sites in the world as rental income is tax-free, and there is no capital gains tax.

 

Investment funds and Coronavirus

Investment funds and Coronavirus

With the outbreak of the Coronavirus, confidence in the future of the global economy has shaken, prompting investment funds to change accounts and look for safe havens to preserve the value of their assets.

 

REIT funds are relatively medium-risk investments that are not comparable to stocks in terms of high risk. Therefore, in such crises, liquidity is used in safe areas

 

Investing in real estate funds traded in crisis can reduce the volatility that markets can witness, especially high-risk investments, as if they are affected by the market, their impact will not be immediate, as they depend on relatively stable returns in the short term.

 

Will real estate prices increase after the Corona crisis is over?

Will real estate prices increase after the Corona crisis is over?

Expectations indicate that real estate prices will not rise after the end of the Corona crisis due to the company’s desire to increase its sales. On the contrary, the rate of price increases may slow down. As the price increase rates will be reduced between 10-15%, this will be supported by falling interest rates and declining prices for building materials.

 

How to overcome the housing crisis in the real estate sector?

 

  • E-Marketing

E-Marketing

 

This crisis has imposed a new reality represented in moving away from traditional methods of real estate marketing. Therefore, there was a need to use different communication methods such as video, e-mail, social media platforms, and more.

 

This method is successful in continuing to work with ease without the need to expose employees and customers to the risk of transmission of the virus.

 

  • More projects

More projects

 

The current slowdown period in the real estate sector will have a positive impact after the Corona period through the acceleration and growth of the real estate field and the increase in demand for projects.  As the population growth will continue and this, in turn, will lead to the establishment of more huge real estate projects that will accommodate the shortfall that occurred during this period.

 

  • Increasing the need to develop sustainable cities

Increasing the need to develop sustainable cities

 

The idea of ​​sustainable cities has proven effective and most successful during the Corona crisis, so it is expected that this trend will increase after the Corona period is over by allocating areas that combine housing and accommodation, tourism and health services, educational, medical, and recreational. Consequently, these projects will be more popular with investors and buyers in the future.

 

Related Posts

Load Comments