Property Plus
Bangalore
Chennai
Hyderabad
Kochi
Thiruvananthapuram
For a note of realism in real estate prices
The risks are growing but the U.S. sub-prime crisis was just what the booming global real estate market needed to avoid a bigger and more damaging bubble further ahead, leading property investors and analysts have said.
The main message from the Reuters Real Estate forum on the 2008 global outlook for commercial property was that the industry needed to “keep a cool head” as assets re-priced because investor interest in the asset class could not be taken for granted. “The crisis is the best thing that could have happened to real estate because risk premiums had fallen too far and rental growth expectations risen too much and that had to end some time.”
Nick Tyrrell, head of research and strategy at JP Morgan Asset Management, said that the sub-prime crisis “has introduced a new note of realism in the pricing of real estate across the world.” “We are seeing deals coming across our desks at 15-20 per cent below where they were six months ago.”
But commercial property had become overpriced in many markets and a correction was due, not least in the U.K., where activity has slumped and a re-pricing of assets was well underway and even beginning to draw the attention of foreign buyers.
Bigger bubble
As in the U.S., Britain’s housing market was in decline and policymakers had responded by cutting interest rates, potentially creating new problems, Joe Valente, global head of research at property services firm DTZ, said. “The bigger risk now is of a bigger bubble in 2008-2010 if interest rates come down too quickly.”
In view of the growing risk of a U.S. recession, this was not an immediate concern for global investors, not just global property investors, panellists said.“If the economy goes down then so will real estate, along with other markets,” said Matthew Ryall, director of real estate at BlackRock Investment Management.
It was also naive to imagine European or Asian real estate could decouple from the U.S. if the economy sank into recession, panellists said.
Nonetheless, the case for a globally diversified real estate portfolio was more compelling now than it had been for some time, said Timothy Bellman, global head of research and strategy at ING Real Estate Investment Management. — Reuters
Printer friendly
page
Send this article to Friends by
E-Mail
Property Plus
Bangalore
Chennai
Hyderabad
Kochi
Thiruvananthapuram
|
