The spread of the COVID-19, also known as the novel corona virus, has caused many global economies to tremble. The global pandemic begins in China with the most disastrous breakout of over 81,708 reported cases and 3,331 deaths as of April 6, 2020. The virus has brought the manufacturing sector, supply chain, tourism, trade, and several other industries to a major halt. According to Bloomberg Economics, these interruptions could lead to a downfall of nearly $2.7 trillion in worldwide production and output.
We saw how the deadly pandemic shook the world’s second-largest economy—China. Investors and real estate owners are now raising questions as to how the virus breakout will impact the American real estate industry.
Temporary Surge in the Inflow of Foreign Investments
The residential real estate sector has a contribution of approximately $77.9 billion in the GDP of the U.S. According to the International Activity in the U.S. Residential Market, report released by The National Association of Realtors’ (NAR) in 2019. China makes up for 17.2 percent of the entire contribution from the residential real estate sector, which is approximately $13.4 billion. Since China is the most influential investor in the U.S. real estate sector, the COVID-19 epidemic can have prominent effects on the inflow of foreign investments—but in the right way.
Surprised? Here’s why.
Ever since the beginning of the US-China trade war in 2018 and the strengthening of the U.S. dollar, there has been a decline in real estate purchases made by Chinese investors. However, soon after the virus broke out, the investors lost confidence in their faltering real estate market. They are now shifting their investments to countries that still haven’t suffered tremendously from the pandemic.
Revenues in the Commercial Real Estate (CRE) Will Decline
Amid a full-blown pandemic in the United States, the CRE industry is likely to receive a powerful hit. People are asked to stay indoors by the governments, and the service sector, manufacturing sector, and other economic activities have paused. This would lead to a reduction in consumer spending, loss rates on commercial real estate loans would soar, and growth would tumble.
CRE executives are adopting preventative measures to contain the virus—particularly for buildings that accommodate multiple people.
The decline in the U.S. Real Estate Market
As of today, Monday, April 6, 2020, the number of corona virus cases in the U.S. is approximately 336,851, with up to 9,620 deaths.The figure is increasing rapidly, and it’s impacting the residential and commercial real estate sector.
According to an article published in Forbes, real estate sellers who aren’t planning to sell under these circumstances are looking to relist their residential properties, and buyers also seem reluctant. According to the Danielle Hale, the chief economist at a known real estate company, it’s a great opportunity for investors who are looking to purchase real estate because the market isn’t crowded.
If you were thinking to sell or buy commercial building in Warren, Chesterfield Township, Clinton Township, or Sterling Heights, get in touch with us at Macomb Commercial Real Estate. For the best real estate advice by the experts, call us at 586-227-9515 to book a free consultation!