The crisis will be deep but the recovery could be surprisingly quick, delegates heard at yesterday’s Real Asset Media’s ‘COVID-19: Implications, Scenarios & Outlook for Real Estate’ briefing, the first to be held online with a panel of speakers and a live audience.
‘It is important not to get into a the-world-is-ending mode,’ said Hans Vrensen, European head of research & strategy, AEW Europe. ‘The good economic fundamentals could signal a V-shaped recovery’.
The month of March has seen a massive correction, with the stock market and the oil price declining steeply. In such a fast-moving situation it is impossible to predict now how deep the plunge will be, but looking at the market fundamentals and at the policies that are being implemented there are reasons to be positive.
‘Markets will recover much more quickly than they did after the Great Financial Crisis, when we saw many consecutive quarters of decline’, said Andrew Burrell, Chief Property Economist, Capital Economics. ‘We’re quite optimistic, but we also need to be cautious because this situation is unprecedented’.
CRE volumes and trading are correlated to stock market moves, as are the prime capital values of real estate, so the recent rebound in financial markets and any mildly positive trend is to be welcomed, Vrensen said.
‘The financial markets will settle down, and the unprecedented policy response from Governments and Central banks is such that lower for longer will become almost lower forever’, he said.
Bond yields are likely to stay extremely low or negative, which will make real estate look interesting in investors’ eyes.
‘The policy response has been unprecedented, and there is more government support to come,’ said Burrell.
‘We prepare our clients for the worst-case scenarios, so that they can be surprised by the upside, because the worst-case scenario probably will not materialise,’ said Vrensen. ‘People are being inventive and creative, finding their way around obstacles. I am convinced we will overcome this and we will be stronger once confidence is restored’.