We are encouraged by most of the developments at the start of the new decade for the prospect of the real estate markets.
The deal between the US and China to resolve their trade disputes leads us to believe that our economy will regain some strength in 2020, after suffering in 2019. Uncertainty about future trade arrangements was one of the major drivers for restrained real estate investment spending and the main reason why our economy lost so much steam in the past year.
In addition, the parliamentary elections in the UK in December 2019 and the overwhelming vote to leave the European Union (EU) at the end of January 2020 are also sent clear signals, which have reduced uncertainty for the real estate investment markets. The UK left the EU on 31 January.
The uncertainty about a potential escalation of the US-Iran conflict also started to abate as Iran decided to avoid direct military with a token retaliation after the assassination of General Soleimani by a US drone.
A development that may have an immediate negative impact on our economy is discovery of the coronavirus in China and the spread of this disease to other parts of the world. Real estate equities have posted losses since the discovery of the disease mid-January, with values down by around 3%. So far, at the time of writing, 14,557 people have been infected by the new disease, around 99% of who are in China and only 1% in the rest of the world, according to data from the World Health Organization (WHO).
In contrast to the SARS disease in 2002/2003, China has taken strong measures to curtail the outbreak of this coronavirus, starting by notifying WHO immediately, restricting transportation and tourism within China, and expanding its capacity to treat infected people. In addition, many health research laboratories are working intensively to find an appropriate vaccine. Given these measures, there is a good chance of containing this new infectious disease. With respect to the impact of this outbreak on our economy, it depends on the length and interruptions of production.
In CRES’ view, the most important development for our recovery is the partial resolution of trade tensions between the US and China. This shows that both countries are actively engaged in resolving their current differences in bilateral trade. Consequently, we are confident that the US and China will continue to negotiate further trade arrangements to iron out the remaining trade disagreements. This should restore real estate investors’ confidence. These developments will be closely monitored, and the impact on real estate values will be continuously assessed.
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