My team has been in constant contact with our friends/colleagues in Hong Kong, NY, SF, and Seattle, and the situation is dire. MGM Resorts and Wynn Las Vegas properties have closed, and it is reasonable to believe Caesars properties could close as well. Air traffic, which brings up to 50m visitors to Las Vegas, is anemic and unless a consumer would like to visit one of our neighborhood casinos, there is no incentive to currently visit Las Vegas. Conventions are canceled, and our school system is shut down.
The mass layoffs at casinos could result in lease and mortgage defaults if the Virus is not remedied in the next 90-120 days. COVID-19 started in Wahuan China in December, and it appears that China MAY be in the recovery phase. Government reporting cannot be trusted; however, Apple reopened its locations in China on March 13th. Starbucks reopened the majority of its locations in China on February 27th. Since it appears that we are roughly three months behind Asia regarding this pandemic, we hope the impact on the US diminishes in 90-120 days.
There may be a silver lining.
Global Demand Of Las Vegas Real Estate
- My contacts state that Hong Kong residents want to vacate as soon as possible which would bring a wave of wealth to the US.
- The stock market fluctuations typically increase demand in investment/rental properties as the income is consistent and not up to speculation, like the stock market.
California Demand Of Las Vegas Real Estate
- California is the primary source of high-net-worth buyers and continues to propose policies that will impact their high-net-worth residences, and we see an acceleration of interest. Here are a few proposals, there are many more:
- Imposing rent control restrictions
- Taxation of vacation homes to aid homeless
- A water tax, to fund safe drinking water in disadvantaged communities
- Closing tax loopholes in the business sector to generate $1 Billion, to double earned income tax credits to low-income Californians
- A phone tax to modernize the 911 emergency system
- CA even floated an idea to tax vacant homes which they believe would result in owners leasing their properties, quickly, and below-market rates.
- The mass exodus from CA should maintain the high-end market. However, it appears that a pandemic is the only event to persuade some Waldorf owners to price appropriately.
Concerning Las Vegas
- There are no new condo projects, so no added supply and condos are still selling below construction costs at some properties. We do not see an influx of listings in the single-family market either.
- Sellers, builders, and others may be more flexible with pricing
- Interest rates are at an all-time low.
- Our general guidance is that there may be attractive investment opportunities upcoming, much like we saw in 2011 when it was perceived that the recession had ended.
The current market crashes are the result of oil disputes by OPEC the Virus and the trade dispute with China, which restricted capital outflows and decimated foreign demand in real estate. It is not unreasonable that all of these are remedied in the next six months.
I will keep everyone posted, stay well.