What impacts will the coronavirus have for investors?

I usually post feature articles on this blog instead and not news articles. But I decided on this Thursday, March 24, 2020, in full confinement, to make an exception to answer a question that some people are asking. Does Coronavirus risk, after the stock market crash, cause a fall or even a crash in the real estate market? Of course, I am not a diviner, but I will try to offer you a detailed argument.

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 Effects on the stock market and crypto currencies

The stock marketand Bitcoin have suffered a sharp and brutal decline as everyone knows. Some stocks have experienced a 30 to 70% decline. It must be said that these supports are speculative and it was already several months that we were worried about a stock market bubble (the markets were rising more than reason and were disconnected from the real economy). We must not forget that behind the stock exchange, unlike crypto currencies, there are companies and their market value depends on their value perceived by investors.

 The stock market reacts based on economic data, announcements from governments, central banks, and companies themselves. It is therefore quite logical that the stock market broke its face at the dawn of a possible major economic crisis. It is also quite logical that it has gone back a little to the announcements of governments and central banks to massively support the economy, and in particular today with a nice rebound. But what will happen in the coming weeks or months? Bad news is likely to continue to arrive and therefore the markets may fall further for the sectors most affected by this crisis. While there may be opportunities to invest in some companies today when the markets are lower than a few months ago, you should be careful because they are probably not at the bottom.

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The economic crisis factor

It is difficult to compare this crisis to other past events. That of 2008 had nothing to do. It was a financial crisis that had more impact on American households than Curacao. Today we are living through a health crisis which is turning into a global economic crisis.

Robert Kriyosaki predicted in his book A Second Chance: For Your Money, Your Life and Our World (released in 2015) that an economic crisis much bigger than that of 2008 was going to occur. He was not the only one to speak about it and was only a few years wrong about its date of occurrence. He presents the crisis as an opportunity to build new things.

It should be noted here that what happens on the stock market is in principle totally different from what can happen on the real estate market, which is not speculative.

The 2008 crisis had an impact on the Curacao real estate market. The rise in rates had reduced the budget of buyers and therefore blocked sales volumes and then lowered prices. It was a small drop however (nothing to do with what happened in the USA).

A probable slight drop in prices in the short term on the real estate market

Currently the real estate market is totally on hold. Real estate agencies are closed and private sellers can no longer visit. The current compromises will be delayed because of the longer time to obtain financing but also the time to have an appointment with his notary. This is bound to have an impact on sellers (who put up for sale before containment) who will likely be more inclined to accept a low bid. They will have seen their time to sell extended by confinement and will probably be more concerned about finding a buyer quickly given the economic context which is likely to deteriorate.

And the longer the confinement lasts, the more it will be true. Scientists have just recommended 6 weeks in total.

 Then a real estate crash?

It is too early to say, but what is certain is that the market will suffer in sales volume in 2020. Many people risk postponing their purchase or sale plans. Lowering prices is not impossible. Once again, it is difficult to compare this crisis to other crises because it is an unprecedented situation!

But from there to talking about a crash? Unlike the stock market, a few months ago no one spoke of a real estate bubble, but rather of a possible downward correction in the market. The real estate market has a big asset in its sleeve: there is nothing safer than stone! Are investors going to take refuge there? Did this recent stock market crash just publicize real estate Invest in Curacao?

The real estate market, which is made up of primary residences as well as rental properties, also has black spots:

The real estate market is directly linked to the ability of banks to grant loans. However, we know that there is a tangible asset that the bank can seize if you do not repay your loan.

The real estate market is directly linked to the health of the economy and this crisis could lead to unemployment and bankruptcies. And it is in my opinion that this will all play out.

I have just learned that notaries anticipate a fall in the property market of around 10-15%.

 To conclude this article, keep in mind that any market is made up of 2 opposing forces, supply and demand and that they are the ones that make market prices! We are only at the beginning of the crisis and it is difficult to give forecasts but we can anticipate possible trends. My feeling is that there will probably be good opportunities to invest in the coming months on the stock market as in real estate for people who will know how to seize the opportunities or create them! So be positive. Do not see the crisis as a danger but rather as a way of taking a step back and reconsidering things from another angle. And take advantage of the confinement to study future investments.

 What did you think of this article? Do not hesitate to leave me your opinions on the question of the evolution of the real estate and stock markets in the comments below… and let us move forward together towards your financial freedom  !

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