The View from the US
What stimulus and support measures have been introduced in the US?
2 minutes to read
On 27 March, a $2 trillion relief bill was passed by Congress, which sets out a range of measures for individuals and businesses including stimulus payments, expanded unemployment coverage and student loan changes.
The new law grants a one-off payment to singles earning $75,000 or less, of $1,200, whilst couples earning $150,000 or less, receive $2,400. In addition, a payment of $500 is provided for every qualifying child aged 16.
However, the two measures of greatest economic relevance are the expansion of unemployment benefits and the additional support announced for small and medium-sized business. This will take the form of a bank loan backed by the government, the aim being to reduce redundancies by encouraging businesses to furlough staff instead.
As reported in a previous blog, fiscal stimulus measures in the US equate to some 10.5% of GDP, the second-largest of measures announced to date.
How is real estate market adjusting?
The precise definition of “essential services” varies from state to state, but in New York, real estate agents are lobbying Governor Andrew Cuomo to include brokers under the essential workers banner.
In New York, the closing process usually takes place with all parties meeting face-to-face to sign the necessary documentation. By comparison, in California, exchanges and completions are usually carried out remotely via escrow accounts. However, with viewings largely halted due to social distancing rules, agents are being creative by using technology to conduct virtual viewings
The appraisal industry is also adapting, increasingly offering drive-by appraisals and a FaceTime call with the current occupier to gauge the internal condition of the property.
What is the outlook for the New York market?
Sales volumes will be impacted heavily in the short to medium-term but there is no reason to suggest prices will decline significantly.
The New York market was starting to see green shoots before the Covid-19 crisis, with evidence of demand building in January and February across Manhattan’s luxury hotspots as buyers looked to capitalise on lower prices.
Should the crisis lengthen, developers will see inventories expand, increasing the likelihood of price reductions in the new-build sector, an appealing prospect for some buyers given interest rates are back to historic lows.
The stock market’s volatility may also boost property demand in the coming months. Prior to the crisis, the S&P500 was performing strongly and offering solid returns, pushing some prospective buyers into rental accommodation in order to plough larger sums into stocks and shares.
However, on 9 March, the S&P 500 plummeted almost 8%, its largest decline since 2008, as the markets became concerned about Covid-19 and an impending oil price war. Although the S&P 500 has since recovered some of its losses, we expect the crisis may underline the appeal of property as a less volatile asset class, particularly as some investors look to diversify their portfolios.
