Wednesday, February 28

IMF Fears for Real Estate Market After Corona Crisis

The corona pandemic may have far-reaching consequences for commercial real estates’ demand, such as office spaces and retail properties.

 

The International Monetary Fund (IMF) warns against this, which also points out that this could affect the general financial stability in the world.

Due to strict corona measures, many office buildings worldwide are empty, there is much less on-site shopping, and prices for hotel rooms are very low due to lack of demand. For the time being, these are temporary symptoms of the corona pandemic. But according to the IMF, the decline in demand for physical stores, for example, could take much longer.

Because more and more shopping is taking place online and people are working from home, a lot is changing in society, making it possible that the situation will never return to the old thoroughly after the crisis.

Then the demand for properties would decrease, with the result that prices on the real estate market could fall sharply. According to the IMF, this could impact financial stability as commercial real estate loans in many countries account for a significant portion of banks’ loan portfolios.

The Washington organization advises policymakers to, for example, set mortgage limits to ensure that the financial risks associated with commercial real estate cannot become too great.

In addition, to keep the banking sector strong, stress tests could help. Based on this, it is good to assess whether enough money has been set aside for when real estate suddenly turns out to be worth a lot less.

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