The Real Estate Investment Network downgrades effect of coronavirus on real estate
REM
Disruptions in GDP growth rates can affect real estate markets within an 18-month period, according to REIN?s Long-Term Real Estate Success Formula.
The impacts of the new coronavirus on Canadian real estate is expected to be “modest and temporary at most,” says a report by the Real Estate Investment Network (REIN).
“It’s still premature to predict how the coronavirus outbreak will be resolved, but data suggests that panic will only worsen the country’s economic situation. There is reason to be alert, but there’s absolutely no reason to further raise alarm and cause more public fear,” says Jennifer Hunt, vice president, research for REIN. “In fact, as a Canadian real estate investor, this may represent a buying opportunity for investors with a likely future positive lift in rental and housing markets.”
Fear and concern surrounding the coronavirus is impacting trade, travel, tourism and the Canadian economy, says the report. But given historical and projected data, it could have less effect than anticipated, it says.
“This analysis is by no means 100 per cent accurate, but much like what happened to SARS in 2003, fear and panic are the biggest risks to the country’s economic and real estate outlook,” says Don R. Campbell, senior real estate analyst for REIN. “These findings are based on REIN’s Long-Term Real Estate Success Formula that outlines the economic drivers and market influencers shaping the Canadian real estate market today.”
GDP growth is a strong indicator of an economy’s continued growth. Disruptions in GDP growth rates can affect real estate markets within an 18-month period, says REIN, adding that recovery from the outbreak will likely result in a positive lift in rental and housing markets 18 to 24 months after GDP fully recovers.
“We hope the outbreak is contained, limiting both health and economic impacts. When the situation normalizes, one can expect an influx of Chinese immigrants and capital to Canada resulting in increased demand for real estate,” says Hunt.
The report says Canadian real estate will see an immediate cool down with long-term lift due to a temporary, small decrease in GDP growth, followed by increased immigration, increased foreign capital and increased demand, leading to increased property values. “These factors represent a buying opportunity now,” says the report.
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