The COVID-19 pandemic continues to impact the world in new and evolving ways. In addition to the obvious health and economic issues, government responses to curtail its spread and support those affected are rapidly changing. The following summary focuses on our current state-of-affairs, as of this writing, and the anticipated impact on relocation and assignment management around the globe.
Based on reported numbers of active cases, the duration of the curve in China from lockdown to returning to work and beginning to reopen businesses was about eight weeks. Experts expect it will take several months to return to previous operational levels.
U.S. Real Estate Considerations
Because the COVID-19 pandemic is so fluid, it is uncertain how real estate markets will fare in the upcoming months. At the time of this writing, Dr. Lawrence Yun, Chief Economist for the National Association of Realtors, sees mixed effects on real estate from COVID-19 and, while societal response such as social distancing has affected the real estate market, acknowledges the future is difficult, if not impossible, to predict.
“With fewer listings in what’s already a housing shortage environment, home prices are likely to hold steady,” Yun said. “The temporary softening of the real estate market will likely be followed by a strong rebound once the economic ‘quarantine’ is lifted, and it’s critical that supply is sufficient to meet pent-up demand.”
With that in mind, Yun cautiously added: “The decline in confidence related to the direction of the economy coupled with the unprecedented measures taken to combat the spread of COVID-19, including major social distancing efforts nationwide, are naturally bringing an abundance of caution among buyers and sellers. However, Yun believes that the nation’s housing market could potentially be looking at “a V-shaped robust recovery” later this year. According to Yun, the underpinnings of the housing market remain strong, even though the coronavirus pandemic poses significant challenges that will undoubtedly result in “downward pressure” on existing home sales for the foreseeable future.
Unlike previous drops in home sales, as during the 2007-2009 subprime mortgage crisis, a real estate softening is not expected to last nearly as long by some.
“Assuming a strong fiscal and monetary policy response, pent-up demand from the spring buying season will help sales recover by the end of the year,” said Matthew Pointon, a property economist at Capital Economics, in an interview with CNBC, but added that “increasingly restrictive measures on people’s movement, and an imminent surge in unemployment,” could impact the market’s future.
Some experts are optimistic when comparing today to 2007-2009 as there were too many homes for sale in 2007, which caused prices to tumble. Today, there is a shortage of inventory that has caused an acceleration in home values. Demand for housing was especially strong before COVID-19 hit the U.S., thanks to favorable demographics and strong employment.
Additionally, it’s much more difficult to qualify for a mortgage today than in the early 2000’s and home prices have also risen nicely over the last few years, leading to over fifty percent of U.S. homes having greater than 50% equity. Further, today’s owners haven’t been tapping into their home equity nearly as much as they did in 2005-2007.
What NEI is Seeing
While the full impact of COVID-19 on the nation’s real estate market will remain uncertain until the impact on the economy and labor force is determined, some NEI clients very recently have taken steps to address a potential, even temporary, real estate slow down to support their relocating employees and their ongoing business needs.
Companies may want to consider temporary modifications during COVID-19 knowing that, while some proactive changes may result in cost increases, the cost increases could be less than if reacting later and could effectively help impacted employees/families now.
Some companies may want to consider the following – based on one’s unique business needs, program goals, corporate cultures and budgets:
< >Extending benefits for such components such as New Home Closing Costs, Old Home Closing Costs Reimbursement, Household Goods Moves -- up to 90 days in 30-day increments, with notification to the employee for 30 days at a time. NEI can track as “COVID-19 related” for clients to allow for clear identification and reporting.Requiring employees use a selected real estate agent to market their homes to qualify for home sale assistance.Extending home marketing time, if employees request more time to sell.Increasing the bonus to the maximum, regardless of when home is sold, if a home sale bonus program is based on selling the home within a certain number of days.Requiring list price restriction to home sale programs so employees list their homes within a certain percentage of the buy-out offer (or BMA or appraisal) to qualify for home sale assistance.Increasing the number of temporary living days, if employees are stalled in a temporary housing situation because of a travel ban.Offering or extending storage days if the employee must vacate and cannot gain access to the new home.HERE or on the graphic to link to that map.
Until things settle down and travel bans, lockdowns, and stay in place orders are lifted, relocations and assignments will need to be addressed on a case by case, country by country basis.
If the past course of this disease and the analysis provided by field experts are true, we should see the peak in Europe hit this week and, in the U.S., the following week, representing the first half of the global pandemic.
U.S. Mandated Paid Sick & Family Leave
In a 19 March 2020 post on the Worldwide ERC® Government Affairs page, Pete Scott, WERC Tax Counsel, discussed a new law that was passed, mandating paid sick and family leave in response to the COVID-19 epidemic.
Businesses with less than 500 employees will be required to provide paid sick and family leave for up to 12 weeks to most employees. Those businesses will be entitled to an offsetting credit against employment taxes.
While this new legislation is unlikely to affect most companies that relocate employees, it does have the potential to impact those providing services to relocating employees. Brokerages, appraisers and destination service providers may experience the tightest squeeze and the smaller the company, the greater the potential impact will be due to cash flow concerns.
NEI has helped client programs successfully modify and navigate the constant ebb and flow of the real estate market and the relocation industry for over 35 years.
Our general advice is to continue with relocation and assignment plans and submit authorizations based on an anticipated timeline provided by the experts so business can get in the que to avoid extensive delays as the world returns to normal.
Your NEI representative and the NEI Global Mobility Strategies team remain available – at any time – to help your company meet your recruitment, relocation and retention goals by discussing temporary or ongoing program modifications to help your business and relocating employees succeed.
The coronavirus respiratory infection - known officially as COVID-19, which causes pneumonia-like symptoms - has been declared a global emergency by the World Health Organization (WHO).
The virus has infected nearly 84,000 around the globe with 94 percent of those cases in China, nearly three percent in South Korea and the remaining three percent distributed around the world with Italy and Iran showing large recent increases.
U.S. Real Estate Considerations
Italy has seen the largest number of cases in Europe – over 650 to date. Italian authorities have announced measures to try to halt the virus's spread. More than a dozen towns in the northern regions of Lombardy and Veneto have been placed in lockdown, leading to 50,000 residents now unable to leave without permission. This quarantine could last for weeks, and schools and other public spaces, including theaters and museums, have emptied. An estimated 100,000+ people are likely to be affected by the travel restrictions. Many U.S. universities are canceling study abroad programs in Italy and urging students to return to the U.S. amid the escalation of COVID-19.
Some NEI clients and other companies have expanded their restrictions to now include EMEA countries. On-site visitors, consultants, and supplier visits are being restricted by several companies unless they can document their travel destinations for the 14 days prior to their visit.
CDC Specific Guidance for U.S. Companies
The U.S. declared the outbreak a public health emergency and the UK declared it a "serious and imminent threat" to public health, announcing new authority to fight its spread.
The Centers for Disease Control and Prevention (CDC) has provided a comprehensive list of considerations for U.S. employers to consider within their “Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019 (COVID-19), February 2020”.
Recommended strategies for companies include:
- Actively encourage sick employees who have symptoms of acute respiratory illness to stay home
- Ensure that sick leave policies are flexible and consistent with public health guidance and that employees are aware of these policies
- Separate sick employees who appear to have acute respiratory illness symptoms (i.e. cough, shortness of breath) upon arrival to work or who become sick during the day and send home immediately
- Perform routine environmental cleaning of all frequently touched surfaces in the workplace, such as workstations, countertops, and doorknobs
- Take additional action steps for employees who are well, but who have a sick family member at home with COVID-19
- Advising employees before traveling to take specific steps, such as: Checking the CDC’s Traveler’s Health Notices
- Checking themselves for symptoms of acute respiratory illness before travel and notifying their supervisor and staying home, if they are sick
- Instructing employees who become sick while traveling or on temporary assignment to notify their employer and promptly call a healthcare provider
- Following company policy for obtaining medical care if the employee is outside of the U.S. and becomes sick or contacting a healthcare provider or overseas medical assistance company to help them find an appropriate healthcare provider in that country
For the full details on the above CDC recommended strategies and more information, please see the report on the CDC’s website at: https://www.cdc.gov/coronavirus/2019-ncov/specific-groups/guidance-business-response.html
Insurance Plan Considerations
NEI recommends companies review their group health insurance plans - as well as any separate assignment, business traveler or other insurance plans covering their employees - to determine how charges related to the virus might be covered. It is NEI’s understanding that some clients have noted certain caveats or clauses within their policies that may exclude coverage for employees that have traveled to countries with a U.S. Department of State warning.
We encourage all clients to review their policies with their benefits teams to understand in advance how COVID-19, related to travel or not, may be covered.
COVID-19 Impact to Global Mobility in China
Several of our household goods partners have reported the following global mobility impacts of COVID-19 in China.
- Most of their partners in China have resumed operations on a very limited level
- In many cases, a small number of staff members are in the office and working long hours
- The process to get the required permission to enter buildings and expat communities requires much more time than normal
- Coordination with transferees, many of whom are no longer in the country, is also taking extra time
- Tight security throughout the country restricts the flow or movement of the staff and the goods
- Flights and sailings continue to be cancelled, which has ripple effects throughout the global shipping industry
- Shipments are moving very slowly without specific timeframes for an expected delivery date
For any questions on a specific shipment targeted for delivery in or out of China, please reach out to your NEI contact.
NEI Global Relocation Assistance
NEI continues to monitor the situation as it progresses and will share updated information as it becomes available. Our pulse survey results were distributed recently and you can access a copy from the below link. Please understand that the survey results are from responses made from 4-6 of February.
If you would like to discuss a plan of support for your traveling or on-assignment employees, please do not hesitate to reach out to your NEI representative or Mollie Ivancic, NEI’s VP, International Services.