As many countries look to reopen businesses and return to normal, experts are trying to come to terms with the long-term impact of COVID-19 on property investment. The short-term effects of the pandemic have hampered real estate investment throughout the Asia Pacific region with volumes plummeting 62 percent in the first quarter of this year, according to Real Capital Analytics.
A closer examination of real estate investment over the past two decades shows it has fluctuated because of global events and economic downturns. Despite that, the overall trend has been for higher allocations to real estate from investors. This is why JLL believes the long-term impact of COVID-19 on property investment will be minimal.
“Real estate continues to offer good risk-adjusted returns that are less correlated to other asset classes. This portfolio diversification advantage of real estate investments is only emphasized in periods of increased volatility in the equities and commodities markets,” a recent JLL report explained.
The report added that the spread between real estate yields and government bond yields remains at levels that favor real estate investment. The consultancy believes real estate investment will return to pre-COVID 19 levels once business returns to normal and could possibly increase over the long term.
Colliers International also believes the long-term impact of COVID-19 on property investment will be minimal assuming there is a sharp recovery in GDP across the Asia Pacific region. If that is the case, the consultancy is predicting a swift recovery in real estate investment beginning at the end of 2020 and carrying into 2021.
One thing real estate investors need to be aware of is the rental market in the country they are investing in. JLL found that an extended disruption in business could adversely affect the ability of people to afford rents in the short term.
However, even that won’t change the long-term impact of COVID-19 on property investment in Asia as the risk-adjusted returns remain more appealing than other assets.