Will The Coronavirus Crisis Push Property Prices Lower?

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By now, the coronavirus has been battering the global economy for weeks. Not only did it cause some stock markets to crash, but it has also forced many people out of a job as orders to socially distance have made it impossible for many businesses to stay open. In fact, investment bankers are issuing notes to investors that the current crisis will spur a full-blown recession. If this happens, it might take months for the global economy to recover from, or even years.

But what does this mean for the property market? Will it suffer a similar fate? Or might it escape COVID-19’s impact to some degree?

Though mortgage rates have fluctuated since COVID-19 took hold, they’re currently at historic lows. Further more, in UAE, the Central Bank reduced the requirements for downpayment by 5%. In a combination with the lower interest rates, this measure is actually encouraging for homebuyers to get advantage on the situation and buy a home easier than in the past.

However, mortgage rates and property prices are two different subject. Given the current economic climate, many homeowners may be concerned that their properties will start to drop in value as workers increasingly lose their jobs and spending declines as a whole.

The reality is that property prices do tend to fall during economic recessions, but the extent to which that happens can vary by local market. In areas of high demand, homeowners may not see their property values go down at all. And with mortgage rates being so low, prospective buyers whose income doesn’t take a hit in the coming months may try to capitalize on that opportunity by purchasing property sooner rather than later. If you manage to attract enough interested buyers, that demand alone can help ensure that should you decide to sell your home, you’ll command a decent price for it.

Another interesting thing is that during the past economic crises home prices largely held steady or suffered only minor declines. This is because during those times, there were fewer transactions and not that many homeowners had to sell at a loss.

Of course, COVID-19 may be an outlier given the drastic impact it’s already had on the global economy. As such, homeowners should prepare for the possibility that we could see a drop in property prices until the dust settles and the economy picks back up. Not only would that leave sellers in a bad situation, but it could prove problematic for property owners eager to tap their home equity in the coming months or years.

However, while the stock market has a tendency to swing wildly, the real estate market doesn’t tend to be nearly as instantly reactive. As such, now is actually a pretty good time to take a step back and see how things evolve. If the current crisis blows over sooner than expected, homeowners may very well emerge from it completely unscathed.

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