Will Property catch the Corona Virus?
The economic impact of COVID-19 is quickly becoming equivalent to the Great Depression. So what can we learn from history and what should we ignore from history?
How can property still be an investment force?
Firstly, people still need to live somewhere, they need to work somewhere, and they need to socialise somewhere. This requires land, space, property on which to conduct these activities. Property as an investment will not disappear and will always be an investment force.
This is in no way suggesting a “she’ll be right” attitude and it will all be rainbows and unicorns once this virus has passed…far from it.
As with all asset classes, if you own an asset at a time like this, then do everything not to have to sell. At the moment you have a balance sheet loss, you only have a cash loss if you sell.
Of course having the ability to hold depends on a multitude of factors including your financial position and the individual assets position, but the simplest way to get yourself into trouble is to be highly geared. Believe me I know! When the GFC hit in 2008 I had significant property assets…but also significant debt. Values went down but of course debt didn’t. Most devastatingly, cash flow dried up through a lack of demand from commercial tenants and residential buyers. I had thought I was risk averse and had always accounted for a 20% drop in values, well that turned out to be far too conservative…but of course I am wise in hindsight.
The old saying “Cash is King” rings ever true and at the end of the day it is not rocket science.
Minimise gearing and debt
Have an attitude of holding assets for the longer term
Short term capital gain is a bonus…not a business strategy
Asset type and location within that market are critical. Poorly located assets are the first to drop off in an economic decline and the last to come back
Don’t forget to check out our services page for all our quick tips and free guides on our services.
