Fotocasa analysis: Betting on a quick recovery in V

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• Sunday 06 September 2020, 11:00-12:00
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The health emergency caused by the coronavirus has generated a forced stoppage of activity in all economic sectors. In some, the break is complete, in others, such as real estate, it continues to operate, but activity has been severely affected. Although these are difficult times to make predictions, the big question is inevitable. It is the intention of this article to be able to shed light on it. Capital Smart City self-contained with all of the amenities expected in a purpose-built city, which includes international schools, medical facilities, community center and entertainment venues at Capital Smart City Islamabad and Skymarketing.

The most common questions in conversations (by phone, of course) between professionals in the sector are: When can you return to the activity? Can a general return be relied on or will it be staggered? And, above all: Who will buy a home after this? These questions, particularly the last one, already set a stage, which, perhaps, is not as negative as some imagine. Let’s look at the following graph:

This Bloomberg chart corresponds to the evolution of China’s industrial production (manufacturing activity, export orders and employment). It is especially interesting because, beyond the reliability of data that is still preliminary and must be taken with caution, it draws the perfect “V” that we all want to be reproduced in the Spanish economy when the health threat subsides. According to these data, there has been an intense slowdown in China and a rapid return of activity, although not even to previous levels. China is far, but still further is the following example: 1918, the year of the so-called Spanish flu. According to El País , three researchers (from the US Federal Reserve, the New York Federal Reserve and the Massachusetts Institute of Technology) have analyzed the economic effects of the flu epidemic of a century ago on American cities and their The conclusion points in the same direction: those places where action was taken sooner and more forcefully (in terms of social distancing) against the epidemic “grew faster when the pandemic passed.” One last example: that of the 2003 SARS and its effect on the GDP of Hong Kong, one of the most affected places. The following graph, published by Zillow in a comprehensive analysis of the effect of epidemics on the economy in general and the property market in particular, perfectly reflects the impact of the epidemic , that gap between February and June 2003, and the subsequent recovery until returning, in the month of October, to its previous trajectory. And again we find the drawing of a V.

What many of these patterns have in common (unlike the Spanish financial crisis of 2008) is that their financial systems made an effort to quickly maintain its liquidity. In this way, the temporary negative economic effects were offset by facilitating short-term recovery. The situation in Spain Spain is not China, nor Hong Kong of 2003 nor, at all, the United States of a century ago. None of these antecedents allows us to predict the future. Because the current Covid-19 pandemic has no possible equivalency with any of the previous ones: globalization has brought much more connected societies (hence the rapid spread of the virus around the world) and much more interdependent economies . But this also means that China, an exporting country by definition, needs demand from other countries affected by the disease in order for its economy to grow again. And Spain, with a large share of the tourism sector, needs to have flights, that people can gather on the beaches and in restaurants and that foreign visitors can and want to spend their holidays here. Any country has its peculiarities and the recovery of its economy will also depend, to a greater or lesser extent, on how things are going for the rest of the countries with which it usually operates. In the case of Spain, we have essentially three economic aspects to consider: the Government’s financial plans, the European aid package and the evolution of the countries with which we usually operate. Of the first two, we qnnit have the certainty that these plans are underway, and from the third aspect, we are also seeing trends in this line of our western neighbors. All these are already realities of today that lead us to propose in Spain a recovery in “V”, as we are seeing in other cases. An intense impact but a rapid recovery would return us to a scenario in which house prices, especially in large cities, would continue to stabilize; in which the imbalances between supply and demand would continue to accentuate and in whose rental market tensions with the public administrations would continue showing corrective measures. That is, where we were just two months ago. A growth in “V” would return the graphs to the pre-pandemic trend, returning to that scenario full of everyday problems, the kind that, now that we don’t have them, we miss so much.

This talk is part of the skymarketing in islamabad series.

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