The Global Effect of a Vaccine on Real Estate

From decentralisation to a housing market in limbo, how will the COVID-19 vaccine impact the real estate industry?

Vanessa Babington-Monegard
December 28, 2020
5 min read

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Is the vaccine a panacea?  Maybe not but it’s worth a shot …

I - like everyone I know and presumably a lot of people I don’t know - have had enough of 2020/the virus.  The advice I want to give? Go live somewhere with a terrace, beautiful views, a nice climate and (preferably) a vineyard next door. 

But, I hear you say, what about the vaccine? Personally, I have to resist the urge of envisaging how one goes about vaccinating a population of 7.8 billion.  So, it is probably safer to steer clear of my thoughts and look at how real estate markets responded to the news.  

The Market Response
The vaccine does seem to have generally had a positive effect, however, as I have noted before, it does seem to make a difference where you are in the world.  As in my contribution to the recent white paper, I am going to briefly summarise what appears to have been the response in Sweden, the U.S., the U.K., Australia and New Zealand.

BAU in Sweden?
If you are in Sweden, the real estate market has shown little reaction to the news of a vaccine and "is still highly active with many deals expected to close before the end of the year”.  This should not come as a surprise given the Swedish market did not, this year, veer much from its predicted course.

Disparity in the United States?
In the U.S., the market generally rallied upon Pfizer’s announcement that its vaccine appeared highly effective.  However, there was something of a split in the housing market: the stocks of builders were down; whilst those of real estate investment trusts (commonly referred to as REITs) were up.  This disparity appears to have been caused by the potential for mortgage rates to rise in the near future.  The obvious take away from this, of course, being that the ‘vaccine effect’ may pale in comparison to other market forces.

A ‘False Dawn’ in the UK?
House prices in the U.K recovered from the first lockdown by advancing 2% in August, giving an annual increase of 3.7%.  This, combined with vaccine hopes had a positive effect on housebuilders’ stocks with their increase helping the FTSE 250 index to lift 0.5%.  Don’t hold your breath though. According to one analyst, this could be a ‘false dawn’ created by the stamp duty holiday, low mortgage rates, pent-up demand and people reassessing their housing needs after the first lockdown.  One has also to take into consideration that unemployment is expected to rise to 7.5% over the coming months, the Help to Buy scheme ends in March and the UK will be leaving the EU.  

A Strong Forecast in NZ?
In New Zealand, they have not needed a vaccine to send the housing market into orbit.  Ultra-low interest rates have resulted in properties selling for hundreds of thousands of dollars above their government valuations.  House prices in November jumped 9.2% on the previous year and are expected to continue rising.  The issue has now become political with the government asking the central bank to do something about it.

Building the Future in Australia?
Australia is now building the biggest houses in the world but this seems to be an effect of the virus generally rather than the vaccine.  Although there has been a lot of political and media focus on the possibility of ‘decentralisation’, recent data has shown that prices in Melbourne and Sydney have begun to recover in line with virus ‘recovery’.  So, this is where the vaccine may have an impact; the return of city markets may occur sooner rather than later. 

In Conclusion
As I said in my white paper article, this is not a comprehensive analysis.  However, it does show a bit of a theme, namely, the vaccine is not a panacea but rather only one of a multitude of things which may be impacting markets.  That said, for individuals, I think the vaccine is that little bit of light (a.k.a hope) at the end of the tunnel and I know I don’t just speak for myself when I say – I need that right now!

If you missed our preceding blog in response to the news of the vaccine in the UK, you can read it here

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