Monthly Archive March 26, 2020

How Epidemics and Pandemics Impact Property Values

Despite significant progress in medicine over the last couple of years, contagious diseases such as malaria and influenza still represent significant threats to modern societies. While some have been fought successfully, others can spread rapidly within a larger geographical area, becoming a pandemic or epidemic such as HIV/AIDS and coronavirus.

The primary effect of a pandemic or an epidemic is human suffering and loss of lives. Pandemics or epidemics present significant repercussions on national or regional economies. Studies show that the alarming spread of diseases impact on the economy through channels like health, transportation, agriculture, real estate, and tourism. Let us focus on the effect caused on real estate, especially on property value.

Positive Impact on Property Value
Since time immemorial, the outbreak of a pandemic or an epidemic carries along a lot of fear. With fear comes the natural need for safety, which causes people to move from hard-hit areas or ground zeros to other areas that seem safe. Places, where people move to, end up having a huge demand for properties, with some who want to buy houses or land and others who want rentals. High demand increases the property values in those regions.

Negative Impact on Property Value
People move away from areas that are hard hit with a disease, leaving behind vacant houses and land with few people willing to occupy them. This creates a vacuum in the demand of property and therefore forcing property owners to reduce their rates to attract the few available customers.

Foreclosure — For fear of contracting a contagious disease, a neighboring land or house owner may short sale his or her property just they can move away fast. Foreclosure usually devalues other surrounding properties.

A global pandemic can force governments to indefinitely shut down learning institutions, prohibit public gatherings in social places and shut down public transport like railways. Such government interventions affect the neighborhood dependent on these facilities. People buy property while putting a high value on the proximity of learning institutions, public transport and shopping social centers such as malls. Indefinite closure of such facilities and services creates an uncertainty of the students’ education and transportation to work. If this situation continues for a long time, then the value of the properties in the region will drop.