The hours that were previously spent at the workplace are now being spent at home. Fear of the coronavirus pandemic has given rise to stay-at-home orders and quarantine all over the world. The coronavirus pandemic is now a large-scale global phenomenon with most of its human population staying at home and under quarantine. A third of the world’s population opted for self-isolating in their household. Covid-19 has affected the global demand for rental properties to slow as the impact has been felt heavily on personal lifestyle, economic growth and business activity.
The Covid-19 outbreak and measures to contain it has resulted in a low growth due to the economic slowdown across countries in the world. The global real estate rental market is expected to grow at a compound annual growth rate (CAGR) of 1.6 percent in 2020. Once the risk of the coronavirus pandemic has been contained and steps taken towards an altogether productive economy, the market is then expected to continuously recover and grow at a CAGR of 8 percent in 2021 and even exceed further in 2023.
It is worth contemplating on what the new normality might seem as China is offering some insight on what actually this might be. In 2019, Asia Pacific was the largest region in the global real estate rental market, accounting for 32 percent of the market. This was followed by Western Europe as the second largest region accounting for 29 percent, as Africa was the smallest region in the global real estate rental market.
Covid-19 has reduced the amount of rental transactions taking place. The course of recovery is difficult to forecast as the level of uncertainty in the economy has slowed down the real estate market. The economic impact has already taken effect as some tenants are unable to pay their rent. The effect has also been seen at the lower end of the market, as many professionals have lost their source of income. However, individual countries across the world have taken measures to try to mitigate the current situation while protecting their citizens and economy through this difficult period.
In the real estate sector, new trends are evident as real estate agents are increasingly adapting to new technologies such as virtual reality, video and online listing. These strategies are meant to provide better quality services and strengthen the buyer-seller relationship. The advancements in technology has a positive impact on the real estate market and property demand. Technologies such as e-signing,video and virtual tour enable transactions in real estate.
In the Western economies, governments have sanctioned new interventions to mitigate the financial difficulties faced by residents and landlords securing a sort of short-term market stability. The emergency legislation requires landlords to extend notice periods or to either ban tenancy terminations. The Irish government introduced a ban on both rent increases and tenancy terminations by enacting the Emergency Measures In The Public Interest (Covid-19) Act 2020. Spain had a similar approach and announced new measures by extending leases for six month while the state of emergency is in place. In the UK they introduced relief for landlords such as mortgage holidays for buy-to-let landlords to minimize the income loss.
The coronavirus pandemic has led to restricted mobility and diminished consumer confidence. Despite this, the leasing demand has been resilient to economic shock as the global outlook is positive. There is less forecast for rental growth since new letting enquiries and tenant mobility have reduced having been affected by the cost. Growth is expected to be less until income growth returns.
There are factors which will determine the severity of the economic downturn in different countries such as the monetary policy response, social distancing measures and the duration of isolation. Finally, the duration of the coronavirus pandemic in different countries will determine the effect on the global real estate rental market.