One could be forgiven for thinking that 2020 is a lousy year for investment, but it truly depends on the type of investment you’re seeking. Real estate investment has been going strong for the past seven years and is still in the lead over other forms of long-term investment. An April Gallup report indicates that “Americans have become less likely to view stocks or mutual funds as the best long-term investment after U.S. markets dropped by more than a third as the economic implications of the coronavirus outbreak set in last month.”
In recent months, the stock market volatility has made the general stability of the real estate market look increasingly attractive for investors. At the same time, we see the impact of the coronavirus on construction, furthering the existing shortage of properties on the market. With current interest rates lowered to help stimulate economies around the world, borrowing has become more affordable for those with adequate financial security. This could be enough to motivate home buyers to take the plunge.
Those interested in buying rental properties need to be aware of the local economic impacts of the pandemic in the area they’re looking to purchase. While rental properties can be a source of passive income, the best investment opportunities will be in areas where the labor market has seen the least damage. Otherwise, landlords may find their tenants struggling to pay the rent.
Commercial real estate is the real estate sector that has seen the most significant decline as hotels and retailers have taken the most significant hit from losses due to the pandemic. In May, CNBC reported a 28% drop in commercial real estate, while retail spaces were down 40%, and hotels and resorts were down 48%. According to the CEO of digital wealth manager Syfe, Dhruv Arora, that drop off will take some time to correct as attempts to reopen are completed in phases. While this sector poses the highest risk for investors, it also offers excellent potential opportunities for investors with a long-term perspective.
As with any investment, investors must do their due diligence in researching and know their tolerance for risk.