How Is Omicron Going to Affect the Real Estate Industry in Pakistan

Omicron the new variant of Coronavirus has been declared a pandemic by the World Health Organization. As per latest reports, this virus is spreading rapidly across all countries and causing thousands of deaths every day. Although most people are aware that this deadly disease will affect real estate industry as well but how exactly? This article attempts to answer these questions. 

The global economy is currently facing unprecedented challenges due to COVID-19 outbreak. It seems like the worst of times have come for everyone – governments, businesses and individuals alike. Many experts predict that it will be difficult to get back on track after this crisis passes through. In order to understand what kind of impact it may have on real estate industry; we need to look at some factors: 

What Does This Virus Mean for Real Estate? 

First of all, let’s discuss what does this virus mean for real estate market. There are many aspects which will be affected; here are few of them: 

Restrictions in travel & trade 

Due to lockdowns imposed by various governments around the world, international travel has been severely restricted. Similarly, due to increasing cases of coronavirus, people are avoiding non-essential travel such as going out shopping or visiting relatives. Moreover, restrictions are being imposed on foreign workers who cannot return home due to quarantine. Most of the tourist destinations are also closed down due to lack of tourists. All these factors will result in a decline in tourism and travel industry. 

Decline in economic activity 

According to experts, there is an estimated decrease of 2% in global GDP due to this pandemic. With millions of people losing their jobs and billions of dollars getting wiped off stock markets, it is expected that economies will take a long time to recover from this shock. Businesses are struggling with declining sales, increased costs, and uncertainty over future revenues. Even though the lockdown period will end soon, people will continue to stay at home and avoid public places. It is highly likely that consumer spending will fall drastically during this period. Furthermore, companies are cutting down on hiring due to fear of exposure to the virus and reduction in demand. 

Decline in business operations 

Due to lockdowns, offices are shutting down temporarily. Employees can either work remotely or telecommute from home. Companies are shifting production lines to ensure continuity of supply chain. However, they are also restricting access of visitors to reduce chances of transmission of the virus. Thus, employees are forced to work from home. As per recent estimates, approximately 1 million American jobs have been lost due to this virus. Experts believe that unemployment rate will rise to 15% in U.S. alone. Moreover, most of the small businesses are not able to operate without face-to-face contact. Therefore, if government doesn’t lift the lockdown soon, businesses will suffer more losses. 

Decline in financial activity 

Financial markets have seen a sharp decline since the beginning of this year. Investors are worried about the effect of this virus on their portfolios. Due to fear of contagion, investors are dumping stocks of companies involved in travel, entertainment, leisure, hospitality, retail, manufacturing, etc. Many companies are experiencing a drop in revenue and profits. This is affecting corporate earnings and dividend payments. Moreover, banks are reducing lending rates and offering cheap loans to businesses. Banks are also arranging short term credit facilities to cover working capital needs of small businesses. 

Decline in residential property prices 

Due to fear of contracting the virus, people are buying homes only if they have to move out. Thus, properties which were previously sold are now lying unsold. Also, due to reduced tourism, rental income has decreased significantly. Since many people are unable to travel due to lockdown, they are opting for renting instead of purchasing houses. These factors are driving down the price of properties in urban areas. 

Decline in commercial property prices 

Commercial properties are mostly located in cities and therefore are less affected by this virus. However, there is a possibility that rentals will increase as people are looking for alternative accommodations due to restrictions imposed by governments. Moreover, restaurants, bars, and other service providers are suffering due to lack of customers. If governments don’t lift the lockdown soon, it is expected that commercial property prices will decline further. 

Decline in industrial property prices 

Industrial properties are usually located in suburbs and thus are less affected by this virus. Nevertheless, due to fear of contracting the virus, tenants are delaying rent payments and refusing to renew leases. Landlords are struggling to find new tenants due to limited availability of vacant units. As a result, industrial properties are becoming cheaper. 

Decline in agricultural land prices 

Agricultural lands are highly prone to this virus. Farmers are unwilling to sell their crops due to fear of contracting the virus and loss of buyers. Due to shortage of labour, farmers are also reluctant to hire temporary farmhands. Moreover, most of the farms are located in rural areas where transportation of goods is difficult. Thus, agriculture will remain unaffected by this virus. 

Impact On the Real Estate Industry 

The impact of this virus on the real estate industry depends on several factors such as duration of lockdown, extent of decline in economic activity, and severity of the disease. Although it seems like all industries will be impacted due to this virus, real estate industry will face the brunt of this crisis. Omicron will spread rapidly through human population and cause widespread disruption to everyday life. 

As discussed earlier, restrictions on travel and trade will affect tourism industry. In addition, millions of people are losing their jobs due to closure of businesses. The global economy will take a long time to recover from this shock. Due to decline in travel and trade, demand for hotels, restaurants, etc. will fall drastically. Similarly, rental income of commercial properties will also decrease. Moreover, many homeowners are facing difficulties in paying mortgage instalments. Consequently, demand for residential properties will drop. 

Final Words 

Due to the above factors, it is expected that real estate market will experience a significant decline in prices. Most of the major players in the industry are already planning to cut prices of their products in order to attract consumers. Moreover, some companies are going to offer discounts on mortgages in order to encourage homeowners to buy properties. However, most experts believe that recovery will happen after 2 to 3 months. There is no doubt that the current economic downturn will negatively affect the real estate industry.