Since the outbreak of COVID-19, investment directions have faced severe volatility, starting from March 2020 when global stock markets, real estate markets, and even bond markets—often viewed as stable assets—experienced significant declines. This reflects the profound impacts that the world has not faced for decades.

Nevertheless, the financial system continues to operate, with crucial mechanisms stemming from the monetary policies of various central banks that have collectively injected money into the system, reducing interest rates to nearly 0% and providing emergency credit sources to businesses. All of this has resulted in a massive liquidity influx into the capital markets, which has been passed on to other assets.

We have thus witnessed an unexpected phenomenon: shortly after investors sold off all risky assets to hold cash, the use of various financial instruments by central banks worldwide, combined with investors beginning to ease their concerns that the pandemic was not as frightening as initially thought, led to a renewed investment in various risky assets, including stocks and real estate, which have shown signs of improvement amidst a declining economy.

Regarding real estate investment abroad, sources from leading foreign securities firms indicate that during the initial phase of the COVID-19 outbreak, the real estate business abroad showed signs of slowdown, with sellers reducing the launch of new projects and buyers lacking confidence in the economic situation, leading to a reluctance to purchase high-priced properties at that time. This resulted in property prices dropping by approximately 15-30% from their original prices.

However, due to various measures from the government and banks relaxing conditions for low-interest home loans, along with changes in behavior from working in offices to working from home, there has been an increased demand for spacious living spaces to accommodate everyone in the household. This has led to significant reflections in the foreign real estate business from 2020 to 2021.

In the United States, since the end of Q3 2020, we have begun to see signs of recovery in the real estate business, especially regarding prices, which have started to rise again during the second wave of the COVID crisis, marking the highest increase in 15 years.

 

 

In 2021, while the global real estate business still faces ongoing impacts, it is expected that figures will grow from 2020, which had a negative base, as the purchasing power group continues to seek long-term investment assets, particularly in the global secondary home market, where we see signs of recovery.

As for economic recovery, it is viewed that the recovery will shift from a V-shaped recovery, which typically occurs in previous financial crises, to a K-shaped recovery, meaning there will be both businesses that can grow well during the crisis and those that are adversely affected and may recover slowly or face closure, such as tourism, hotels, airlines, and various service-related businesses.

 

 

          For investments during this period, investors are advised to diversify their portfolios, focusing more on riskier assets. For example, investing in real estate (classified as medium to high-risk assets) benefits from low-interest rates, as this reduces the cost of borrowing for property purchases. It is anticipated that global interest rates will remain low for an extended period, with governments being key players, as they do not want to increase fiscal burdens after having borrowed emergency funds to support the economy. Additionally, this is seen as a means to maintain financial stability during a fragile economic period.

 

         Furthermore, the strong recovery of the global economy, evident since Q3 2020, leads to the belief that the world will begin to see an increase in inflation over the next two years, rising to around 3% from the current 1%. This anticipated inflation is expected to positively impact real estate prices, as real assets have limited supply. When the money supply increases and no alternative supply can replace it, real estate prices tend to rise in line with inflation. Therefore, investing in real estate over the next 2-5 years is recommended.

In the post-COVID-19 world, investing in residential real estate that is owned appears to be the most attractive option, as its utility remains unchanged (or has increased due to the shift to remote work). This contrasts with commercial real estate (office buildings, retail spaces) and tourism (hotels, convention centers), which have been permanently affected by COVID-19, such as the growth of e-commerce replacing traditional retail or the reduction of office space after adjusting for remote work. These trends, although newly emerging and varying in popularity across regions, are expected to become a widespread phenomenon that will persist for a long time or permanently (the new normal). Additionally, investing in residential real estate will continue to yield returns in the form of rental income and capital gains, unlike investments in Real Estate Investment Trusts (REITs), which may not be able to collect rent as before.