I’m trying to find informatin on what happened to american real estate values after the Nikkei market crashed and link it to chinese investment today. My thoughts are Chinese investors used american (among other country real estate) as safe havens but as their market heads into turmoil, they’ll be forced to sell said assets. Im looking to link what happened in the late 80s to what we are experiencing now.
nah don’t bother, this time is different.
I used to work on REITs so I had to look at this stuff quite a bit for our outlook pieces. It’s quite difficult to draw a parrallel there to the 1980s. There are also more players than just the Chinese. Certainly Chinese money has driven a good chunk of commercial real estate (CRE) transaction volumes as of late, but it’s not as big as you might think. Canada and it’s behemoth pension funds continue to be the biggest investors (~25%) in US CRE.
The reason the Chinese are grabbing the headlines is that they are relatively new to the table and their investment share has grown considerably over the past several years (now at 8%). Further, their investment objectives are very different than how a REIT, pension fund, insurance company or PE firm might look into it. As you pointed out, they are looking for safe havens to park capital. This is why you see transactions in NYC where Anbag bought the Waldorf for $2B or well over $1M per key (room), which is well above what fundamentals would justify. That being said, the buzz around real estate conferences is that the Chinese tend to be savior investors than the Japenese of the 1980s (I’m sure the Japanese today are a lot more sophisticated).
The other complication is that since Chinese foreign investment is still fairly small relative to its economic size, you could still see growth in capital flows to the US and other markets like London.
True, an economic tail spin could cause capital flows to slow or go negative; you’re already seeing this in the case of Russian money, as well as LATAM countries. The effects have hurt transactions in some markets, but in aggregate, CRE in the US remains healthy.
Finally, to answer what you are looking for; what will happen to US CRE over the next several years will largely be driven by supply and demand, as has always been the case. It’s also importat to remember that fundemantals for real estate are very local (hence the layman’s phrase “location location location”; of course it’s more complicated than that). All in all, for the most part fundamentals for US real estate are strong. The economy is growing, supply is still limited across most property types and in most markets, capital is cheap, funds are still underallocated to real estate, and leverage/underwriting standards have improved (meaning most aren’t ridiculously overleveraged like in the past). You are starting to see some red flags in some markets where valuations are getting ahead of fundamentals, credit spreads are widening and oversupply/economic weakness are a rising concern (e.g. Texas and oil markets). But overall, you should continue to see a healthy US CRE market over the next year or two, barring no major global economic downturn or catastrophe.
I’m going insane bro. All these realtors talk about “the market corrects itself”, “professionals are the ones creating the prices.” Really mrs realtor, market is going to correct itself the day after the open house or is it going to be 3 years down the line after you’ve been paid and im trying to buy in FL, whore. It corrects itself huh, well just tell me how i go about betting on the other side. Do you know anyone i can buy and sell with the agreement to buy it back in 3 years? “I’m not trying to pressure you into a decison”. Oh really, that’s why you’ve sent 3 emails asking for an offer and we only saw it a few hours ago. Giving me gf the impression this is the last unit for sale, ever. “I have a strong relationship with the other realtor and you should write the sellers a note saying why you want to buy it”. I bet you have a strong relationship you colluding working girl, how about the the sellers blow me for the 25% annualized return in a year. I left NY to avoid the inordinate prices, i guess half a mil in boston only get’s you a rat’s nest. I just bought a washing machine just for the card board box. Going invest in some prime real estate on some street corner and play ceelo. KMD, come join ill give you the best 5 secs of hate sex in your lfie.
^Da fuq did I just read?
^sorry dude, little venting there. My initial post is in reference to my housing search in boston, my second post (as you saw) is more just an outlet for distrust in realtors.
begs the question why you would want to be a buyer in a market where dipshits like this can get away with these tactics. wait a couple years and the same shoe licker will pay your closing costs to get a deal closed. you could probably negotiate 30 seconds of the Danza Slap on top of it if you were so inclined.
Whats, I loved your post! That was awesome.
Turd, what’s the Danza Slap?