There is no doubt that the coronavirus is a major concern at the moment as the global spread continues. The UK government has already confirmed plans are in place to lockdown affected cities if they are unable to control the rate of infection. As a consequence, property investors are becoming concerned at the potential impact on not only local economies but also the global economy.
Are we on the verge of another financial crisis?
Without wishing to underplay the coronavirus it is worth reminding ourselves that more people die from traditional influenza and the rate of infection for the SARS virus was much higher. That said, the spread of the coronavirus continues at lightning fast pace and so far the authorities do not have an answer. We are seeing more and more travel restrictions and indeed in Italy and China we have seen whole cities locked down. It is too early to estimate the potential impact on the worldwide economy but the longer this drags on the greater the impact.
While many experts are comparing the current situation with the financial crisis of 2008/9, reflected in stock market falls, they are two very different beasts. While time is obviously of the essence, there are companies across the globe working on a vaccine for the coronavirus with huge investment from governments and private entities. The release of such a vaccine as well as the availability could dictate the short to medium term direction of the global property market.
As you would expect, we have already heard about the detrimental impact the coronavirus is having on Chinese property prices and the rental market. There is a fairly obvious link between economic activity and demand for property across the globe. It will also be interesting to see the results from companies such as AirBNB who depend on short-term leases for their income. Are those traditionally seeking short-term leases taking a step back from the market? Are travel restrictions causing problems?
If we take a look at the UK property market, recent figures suggest growing demand for property and a lack of supply. The rental market has also proved to be extremely popular with the majority of letting agents reporting a jump in new tenant registrations but a reduction in private rental supply. So, it is difficult to judge the short term impact that the coronavirus may have on the UK market, but there will be an impact.
Don’t confuse preparation with panic
The UK government has already announced an array of measures in the event of a serious coronavirus outbreak in the UK. They have refused to rule out any measures including the lockdown of cities where serious infection outbreaks occur. We know that investment markets detest uncertainty but it is wrong to confuse the UK government’s preparations with panic.
The authorities have already addressed the issue of private landlords and how to treat tenants with coronavirus. At the moment there is no need to panic, no additional action required but this will obviously be updated going forward.