Coronavirus Crisis in Real Estate | Putting things into perspective: how bad is it? What to consider when it comes to the Real Estate and Stock Markets?
Coronavirus Is A Global Crisis | 4,636 deaths
The global coronavirus virus is creating fear, crisis, and death. So far 4,636 people died while 68,314 recovered from the coronavirus. A total of 126,423 cases exist, across 124 countries and territories.
The coronavirus COVID-19 is affecting 124 countries and territories around the world
Worldometers
Do We Want To Hear Some Good News ?
There are many good news, but we don’t hear them. Instead, our attention is naturally focused on the bad news: Trump suspends travel from Europe to US (BBC), Italy tigthens lockdown (AlJazeera).
So, what are the good news to look at?
Good News #1: China Has Passed Peak Of Coronavirus Epidemic
China represents 80,000 out of the 125,000 cases of coronavirus in the world (64%). Therefore, it is great news to see that the number of active cases is lowering. Out of the 80,796 cases of infection by the Coronavirus, 62,809 have recovered already (77.7%). Below you can see graphically that the number of active cases is lowering very significantly. Even more reassuring, China reported record low of 15 new cases yesterday (TimesLeader).
Good news #2: Number of Deaths Is 13 Times Lower
The number of deaths in China due to coronavirus is another interesting graph I wish we saw more on TV these days. Indeed, this could help bring peace and calm. Instead, at least on European TV, all we see is Italy’s total shutdown. With over 12,000 cases of coronavirus, Italy is in the accelerating phase, which is where China was in January and February.
Naturally we shouldn’t minimise the situation, but there are two ways to present the situation.
Option one is to show the number of deaths with a linear scale, as below, to create fear.
Option two would be to show instead, the number of deaths caused by Coronavirus per day in China. Clearly, it shows that China went through horrible months in January and February. But it also shows that the situation is under control.
While the worst day was February 23, with 150 deaths registered, yesterday only 11 deaths were recorded, a number 13 times lower compared to the peak. Clearly, this is great news and we should see this more often, to be able to zoom-out, and put things into perspective.
Good news #3: Coronavirus Is Nothing Compared To The Black Death or The Spanish Flu
The Black Death was a devastating global epidemic of bubonic plague that struck Europe and Asia in the mid-1300s. It killed 30% to 50% of the European population within 5 years (History.com), and 50 million people in total globally.
Compared to that, or to the Spanish Flu (50 million deaths worldwide), how bad is the Coronavirus? So far the figures are 4 thousand deaths, not 4 million. So again, let’s not minimize, but put into perspective at least.
Beyond these 3 good news, crisis means opportunity. When markets are crashing, opportunities arise .
How to Get Rich In A Market Crash
Warren Buffet – “When Stocks Go Down It’s Good News”
In situations of crisis, many people are affected and have no other choice than selling whatever stocks they have. Therefore, when stocks go down, it’s good news according to Warren Buffet.
It is wise to be Fearful when others are greedy and greedy when others are fearful.
Warren Buffett
Robert Kiyosaki – Be Greedy When Others Are Fearful
Stock markets plunge as virus becomes a pandemic (BBC). So what should we do? Well, the most counter-intuitive behavior is to act in a counter-cyclical way. When others are selling, buy. When others are buying, sell.
While it’s very difficult and very counter-intuitive, it pays-off on the long-term.
In January, Robert Kiyosaki said he was avoiding stocks, waiting for the next crash (BusinessInsider). In the video below, you can see him talking of yet another crisis, the 1987 (Black Monday) crisis. In any case, the lesson is always the same: Buy when people Sell. Sell when people Buy.
Coronavirus, Stock Market, Real Estate Market
Coronavirus crisis in Real Estate – What Can Happen On Real Estate Markets?
How should we react? Clearly, many people are suffering and will suffer economically this year. There is no way to rejoice about 4,636 deaths, nor to rejoice about thousands or millions of job losses.
Worst, many people might fail to meet their monthly mortgage payments. Indeed, “Banks to allow customers to defer mortgage payments” (BBC). We can say that this is a first impact of the coronavirus crisis, in Real Estate.
What Has Happened on the Stock Market Already?
Many stocks lost 20% to 40% in the last days. If you think long-term, consider buying or following closely the stock markets. Indeed, this crisis will come to an end at some point, and the markets may recover partially, or fully. If you doubt it, look at things such as the evolution of real estate prices over time.
What History Tells Us
Markets recover, but they take time to do so. Therefore, there will be a coronavirus crisis in Real Estate.
For example in Spain, property prices peaked at € 2,048 per square meter in 2007. Then, due to the 2008 crisis, they went down to € 1,200 per square meter in 2015. Only then, did they start to recover, to reach € 1,374 per square meter today. While this is an increase compared to 2015 (+12%), it is still 34% lower compared to 2007.
So, when is a good time to buy ? While it’s impossible to answer this question, we know that today is a better time than it was several weeks ago. What we can’t know yet, is how long this crisis will last. For example, it is only in 1954 that the Stock Market recovered the level it has in 1929, before the Black Tuesday. That’s an astonishing 25 years later!
What will happen today? We don’t know, but some signs such as the fast recovery in China may provide some reasons to be optimistic about the future.
Olá, o meu nome é Luiz e achei muito bem explicado.