Amidst the doom and gloom, concern and confusion surrounding the US government’s response to the coronavirus pandemic, foreign investors seem to be looking more long-term. Even prior to the coronavirus pandemic, the US real estate market was seen by many foreign investors as “the” market to be in during 2020. Despite the threat of a significant economic hit, it would appear that the vultures are already hovering ready to swoop on bargain buys.
The world is currently awash with cheap finance and, if property prices do fall significantly in the short to medium term, rental yields could become even more attractive. The truth is that whether via government financial assistance or utilising employment income, everybody needs somewhere to live. It is highly unlikely US, never mind worldwide, interest rates will rise significantly for the foreseeable future. As a consequence, as markets do eventually start to pick up after the pandemic is over those liquid investors brave enough to buy at the “bottom” could see a significant revaluation in their assets.
It is common knowledge that the US dollar is seen by many as a safe haven during times of trouble. Whether or not Donald Trump has endangered this status with recent flip-flopping on his response to the coronavirus is debatable. So, you have the safe haven status of the US dollar and a likely reduction in property prices in the short term creating what could be significant investment opportunities. While there are other huge economies around the world the simple fact is that between the US and China they will dictate the direction of the worldwide economy.
As the pandemic sweeps across the US, many are suggesting that global cities such as Los Angeles, New York, San Francisco and Seattle have proven to be a weak link in the US protection system. These global cities attract business from all round the world which is probably why New York City now accounts for more than half of US coronavirus infections and deaths. However, on the flipside of the coin, as and when the US economy and the property markets begin to cover it will likely be these cities which will benefit first.
While there are many reasons why the US economy and property market will eventually recover, for homeowners and property investors it is the short term which will dominate their thinking. How will they cover mortgage payments? Will they be able to pay rents next month? How can the US government help to avoid a property market crash?
As we have seen in the UK, the US government has already stepped forward with huge funding to mitigate the impact of the coronavirus on various markets and local economies. The $2 trillion package announced just last week will likely be the first of many as US citizens, investors and businesses look to the government for direction and assistance.
There is no doubt that the US economy will be one of the first to bounce back once the coronavirus pandemic is under control. That said, recent indications suggest there may be huge loss of life across the US due partially to the government’s relatively slow response to the emergency. On the sidelines we have investment vultures hovering over the US property market waiting to pounce. These are foreign investors who were already targeting the US real estate market as their “go to” investment market of 2020.
Any short lived drop in property prices as a consequence of the economic impact of the coronavirus will, for many, simply trigger a stronger buying opportunity.