Jeffery Blair, Author at Amora Escapes

US office loan pain is only starting to ramp up

Jeffery Blair — Mon, 05 Aug 2024 11:09:03 +0000

Any hopes that falling borrowing costs would stem the pain from the US office downturn were swept away last week.

Deutsche Bank set aside more money for souring US commercial real estate loans, while a Blackstone mortgage trust slashed its dividend. New York Community Bancorp’s shares then plunged the most since the last bout of CRE-related turmoil in March after provisions for losses came in at more than double the average expected by analysts.

The announcements signal that lenders may not be able to just amend and extend loans in the hope that lower interest rates will ease borrowers’ pain and allow property owners more time to refinance debt. More than $US94 billion ($145 billion) of US commercial real estate is distressed, according to MSCI Real Assets, with a further $US271 billion at risk of slipping into that category.

“As a $US1.5 trillion wall of loan maturities hits over the next two years, the implications are profound,” John Murray and Francois Trausch at Pacific Investment Management wrote in a note last week. “Lenders and borrowers will be forced to ‘face the music’: in the near term, we expect further declines in appraised valuations and price indices, making loan extensions even more difficult to rationalise.”

The bad news began when Deutsche Bank said the office sector in the US will continue to impact earnings in the coming months, although it expects CRE provisions to be lower in the second half. Later that day, Blackstone Mortgage Trust, a target for short sellers, reported a quarterly loss to the trust of $US61 million compared with a $US101.7 million profit in the same period a year earlier. It cut its dividend by 24 per cent.

The following day, New York Community Bancorp said it set aside another $US390 million during the second quarter to cover loan losses, primarily due to office lending.

“Higher impairments suggest asset revaluations may still be working their way through at lenders and others with real estate exposure,” said Tolu Alamutu, a senior credit analyst at Bloomberg Intelligence, of the outlook for the industry. “As transaction volumes creep up, more adjustments can’t be ruled out. These marks may pale in comparison to last year’s but may still reverberate.”

Credit investors remain comfortable that the turmoil from CRE will be contained, with risk premiums on bank bonds rising less than the broader market, showing they’re outperforming.

Private credit

Private credit providers see an opportunity to profit as borrowers approach maturity walls. CRE debt funds are seeking to raise about $US50 billion in capital over the near term, with some considering the purchase of impaired loan portfolios from banks, according to researcher Green Street.

“With strong liquidity, accelerating repayments, and an emerging investment pipeline, BXMT is well positioned to deploy capital accretively in this environment and continue its forward trajectory through the cycle,” Katie Keenan, Blackstone Mortgage Trust’s chief executive officer, said in a statement.

There are opportunities for investors in both senior and mezzanine debt, Murray and Trausch at Pimco wrote, though they cautioned that the CRE damage will be long-lasting even if the Federal Reserve begins to loosen monetary policy.

Forward curves suggest borrowing costs will keep business property values 20 per cent to 40 per cent below their 2021 high, they said, adding that “the headwinds buffeting the commercial real estate market will result in a materially slower recovery than that seen after the global financial crisis”.

Source: Financial Review

The post US office loan pain is only starting to ramp up appeared first on Amora Escapes.

Pita, Politics and Policies: How the Current Political Impasse is Impacting Thailand’s Property Market

Jeffery Blair — Wed, 31 Jul 2024 14:06:14 +0000

Thailand’s political deadlock is turning potential homebuyers cautious in Southeast Asia’s second-largest economy, posing risks to the property market as some 50,000 flats are likely to be launched this year, analysts say.

“The market is currently slow but quite stable in terms of supply and demand as local buyers are now adopting a more wait-and-see attitude, rather than making a decision,” said Wittaya Dave Apirakviriya, general manager of ThinkOfLiving.com and DDproperty, a unit of proptech group PropertyGuru.

“This is due to the current political situation as we are still in the process of forming a new government.”

Thailand’s political situation is in a bit of flux as Pita Limjaroenrat, the leader of the Move Forward Party that won the most seats in the May election, has been thwarted twice in his attempt to form a government by conservative members of the senate, most of whom have been appointed by the military junta. In another setback, the Constitutional Court has decided to proceed with two cases against Pita for allegedly violating election rules.

Supporters of the Move Forward Party hold a portrait of party leader Pita Limjaroenrat during a protest in Bangkok on July 29, 2023. Photo: AP Photo

To break the deadlock, Move Forward said it would give way to coalition partner Pheu Thai to try and form the government instead. It remains to be seen, however, if the less liberal Pheu Thai will be able to convince members of the senate and assume power after parliament cancelled plans to elect a prime minister on Friday and said a new date would be set.

The political impasse is impacting the property market as real estate stakeholders expect the new government to implement measures to boost the market, Wittaya said. The previous government cut fees for registering mortgages and transferring ownership from this year until the end of 2025. Extending these measures would help the property market, he added.

Real estate stakeholders would like the government to further ease foreign property ownership laws, including allowing foreigners to own landed homes but limiting it to 20 per cent outside Bangkok or luxury villas in beach towns, where the market caters mostly to overseas buyers, according to Peerapong Jaroon-ek, founder and CEO of Origin Property.

Before the pandemic, foreigners accounted for a quarter of all property sales in Thailand, with Hong Kong-based buyers contributing to as much as a third of all purchases from 2018 to 2022, according to official data.

“Currently we see an unclear picture of the political situation, including stimulus measures for the property market and other economic activities, but we believe that we will have a more thorough outlook and understanding after we have a clear political picture and what’s driving the country’s economy,” ThinkOfLiving.com’s Wittaya said.

Real estate is a major driver of the Thai economy, accounting for about 10 per cent of the gross domestic product in 2022, according to a study in May by the Bank of Ayudhya, Thailand’s fifth largest bank.

Before the coronavirus pandemic, developers enjoyed a mini boom due to demand from foreign buyers. But when travel was disrupted in 2020 because of the pandemic, cutting off a vital source of buyers, developers began offering huge discounts and threw in freebies such as cars, hotel and restaurant vouchers and even transfer fees to drum up sales.

The current political uncertainty is likely to further weigh on the property market, as some 50,000 flats are likely to be launched this year in Thailand, slightly more than the 48,700 units last year, according to CBRE.

Thai developers are also likely to launch 35,000 landed units this year, nearly the same as the 34,364 launched in 2022. Developers are also forecast to offer 1,200 luxury and super luxury homes, nearly the same as the 1,218 units in 2022, CBRE added.

The political uncertainty will only have a short-term impact on the property market and investor sentiment, said Artitaya Kasemlawan, head of residential sales project at CBRE Thailand.

Real estate stakeholders would like the Thai government to further ease foreign property ownership laws, including allowing foreigners to own landed homes, an analyst said. Photo: Shutterstock

“The current deadlock will have minimal impact as it has little effect on day-to-day business or cause changes in real estate policy,” Artitaya said. “Any impact on Thai real estate is usually a result of what’s happening in the economy rather than in politics.”

Apart from the political drama, there are several reasons for local and foreign buyers to consider investing in Thailand, according to Kashif Ansari, co-founder and group CEO of Juwai IQI.

For example, average rental yields range between 4.3 per cent and 6.7 per cent in Bangkok, Pattaya and Phuket, he said. This compares with Hong Kong’s net annual return yield of less than 2 per cent.

“Developers have reduced the supply of new units in each of the past four quarters,” Ansari said. “The share of new listings sold in each quarter has nearly doubled to more than 40 per cent as a result. Prices are climbing slowly.”

The Thai property market remains fundamentally sound despite the current political challenges as the country continues to provide a safe and stable environment for foreign residents and investment, Ansari added.

“If you’re investing in Thailand, then the current situation is not a deal-breaker.”

Source : SCMP

The post Pita, Politics and Policies: How the Current Political Impasse is Impacting Thailand’s Property Market appeared first on Amora Escapes.

Commercial Property Insurance Market Proving More Stable, Capitalized: USI

Jeffery Blair — Mon, 17 Jun 2024 09:25:27 +0000

Following last year’s historically challenging property insurance market, 2024 is proving to be “a more stable and capitalized market,” USI Insurance Services reported in its latest Commercial Property & Casualty Market Outlook Mid-Year Addendum.

“Large rate increases from 2023 have mostly subsided for the broader market,” the New York-based insurance brokerage firm said in the report. “Rates are flat to up 10% for both natural catastrophe (CAT) and non-CAT property with minimal loss history and good risk quality.”

Widespread double- or triple-digit rate increases seen in 2023 have largely subsided for the broader market, USI reported, and most renewals “have seen single-digit increases, with some shared or layered placements seeing rate decreases due to the replacement of more expensive capacity from 2023.”

Commercial Property Insurance Trends

In the report, USI listed reinsurance market stabilization, expanded capacity on shared and layered programs, intensifying wildfire woes and updated catastrophe models that may impact insurer appetite or pricing as trends to watch in the second half of 2024.

On the catastrophe model point specifically, the insurance industry is awaiting potential pricing and capacity impacts following new releases from Moody’s RMS and Verisk, the report said. Both platforms included updates to the hurricane models for the U.S. Verisk is scheduled to release an additional update to its Wildfire model this month.

“The areas expected to be most impacted by the new hurricane models include the Gulf Coast and the Southeast, with average modeled losses expected to increase anywhere from 5% to 10%, and as high as 20% to 30% for certain portfolios,” the report said. “Insurers, reinsurers and state regulators are testing their current versions against the updated hurricane models to determine portfolio impact, potential pricing adjustments, additional surplus required and capacity needs.”

USI also noted that captive interest continues; the total number of captives worldwide increased from 5,879 in 2020 to 6,181 in 2023. That uptick was driven mostly by property insurance market conditions, USI said.

Commercial Casualty Insurance Trends

In the casualty insurance sphere, USI reported that the rate and pricing environment for workers compensation remains competitive in most states. Mental injury claims and catastrophic injuries were listed as trends to watch in the next six months.

“Broadening the criteria for compensable mental injury claims may lead to an increase in their frequency, severity and adjustments in WC insurance premiums overall,” the report said. USI later added that insurers are “closely monitoring” catastrophic injuries and could adapt their underwriting if they increase.

And, while USI described the GL/products market as “still challenging,” more flat renewals are being seen in some industry segments, the report said. Real estate and habitational risks “continue to be challenging to place, and insurers willing to cover the risks are typically increasing rates from high single digits to low double digits,” USI reported.

The report also shared that litigation is prompting the reassessment of approaches to per- and polyfluoroalkyl substances (PFAS) underwriting, coverage, risk management and claim handling.

“Most insurers are mandating exclusions on all renewal accounts regardless of industry or exposure to loss, but especially manufacturing, hospitality, retail and owners of real estate,” the report said. Along these lines, USI anticipates that finding PFAS coverage in the environmental insurance marketplace will be more difficult for product exposure, including supply chain/distribution risks and site-specific risks.

Source: Insurance Journal

The post Commercial Property Insurance Market Proving More Stable, Capitalized: USI appeared first on Amora Escapes.

Labour has promised 25-year fixed-rate mortgages across the UK. Who do they benefit most?

Jeffery Blair — Mon, 29 Jan 2024 11:29:04 +0000

Labour has promised a “revolution” in the mortgage market to open the door to 25-year fixed-rate mortgages for millions of homeowners.

Outlining her plan at the weekend, shadow chancellor Rachel Reeves said longer fixed-rate deals would enable people to buy houses with smaller deposits and with lower monthly repayments.

Longer mortgages are common in countries like the US, Canada and Japan, but unlike in some of those, Labour is not proposing they be underwritten by the taxpayer.

Ms Reeves has asked those involved in carrying out a Labour review of financial services to work with the mortgage industry to find ways to remove regulatory barriers and help trigger a broader cultural shift.

Sky News’ Money team asked three industry experts whether they could take off.

Richard Donnell, head of insight at Zoopla, tells Sky News it is a “good idea”, but the challenge will be ensuring rates are as competitive as shorter-term deals, otherwise people won’t be willing to take them out.

The main advantage, he says, would be for first-time buyers.

“Today, the cost of a mortgage and renting is the same, even at 4.5% mortgage rates, but new borrowers are being stress-tested as to whether they can afford 8% to 9%,” he says.

The risk of high mortgage repayments means purchasers – especially first-time buyers – are finding it harder to get on the ladder. As they struggle to get a mortgage, rents have also been rising, leaving people with less in savings. Combined with historically high house prices, first-time buyers are finding it had to put aside the bigger deposits.

“The advantage of long-term fixes is it means you probably avoid the need to stress-test affordability,” Mr Donnell says.

“I believe the government needs to look at how it can support the market for longer-term rates to develop at rates that will support demand for this type of product, as it’s a big mindset change.”

Would Britons really want to lock in?

Kevin Roberts, managing director at Legal & General Mortgage Services, isn’t convinced as things stand.

“It is worth noting that 25-year fixes are already available in the UK, but receive relatively little interest. Typically, people tend to choose the product that offers the lowest rate at that time, and that’s usually a shorter-term product, such as a two or five-year fix,” he said.

David Hollingworth, a director at L&C, agrees.

“There’s potential to grow this sector but until pricing and tie-ins are addressed they may continue to be a useful niche option rather than a market wide choice,” he said.

Two other major drawbacks

Mr Hollingworth highlights another issue.

“Longer-term fixed deals will often tie the borrower in with an early repayment charge throughout the fixed-rate period,” he said.

So if a mortgage needs to be reviewed at some point, perhaps because someone wants to move house, options become more limited.

“Even though deals can be taken to a new property there is no guarantee that the borrower will still meet the lender criteria at that time, or whether the lender will have competitive rates for any additional borrowing.”

Perhaps more obviously, there is also the concern that rates may fall significantly, as happened after the 2008 financial crisis.

“There may be some concern that they will be left high and dry if rates were to subsequently fall,” says Mr Hollingworth.

What’s already on the market?

The most common longer fix is 10 years. First Direct currently offers a fixed rate of 3.99% over 10 years for a 60% loan-to-value mortgage.

Perenna is a new lender targeting the long-term market, offering rates that are fixed for as long as 40 years but that only tie the borrower in for the first five. They currently offer a 25-year mortgage at 5.75%.

Perhaps recognising the early repayment charge (ERC) issue highlighted above, Kensington Mortgages offers fixed rates for the life of a mortgage and although there are ERCs, they are waived in certain situations – like a house move or sale/repayment.

Who could they benefit?

As discussed, first-time buyers struggling to get on the ladder – but also people who want long-term certainty and perhaps have no intention of moving.

“For example, if they are saving for a wedding in X years’ time, it could be handy to know how much they’ll be able to put away each month if what’s likely to be their biggest expense, their mortgage repayments, stay the same,” says Kevin Roberts, from L&G.

Source: News Sky

The post Labour has promised 25-year fixed-rate mortgages across the UK. Who do they benefit most? appeared first on Amora Escapes.

China’s Big Property Market Problem Will Take at Least 4 to 6 Years to Resolve

Jeffery Blair — Mon, 08 Jan 2024 10:52:32 +0000

BEIJING — China has a big problem within real estate that will take years to resolve, according to analysis from Oxford Economics lead economist Louise Loo.

Looking at nationwide data — whether based on official estimates of unsold inventory or the construction-to-sales ratio — Loo found it will take at least four to six years for real estate developers in China to complete unfinished residential properties.

That means efforts to boost funding to developers and other efforts to resolve China’s property market problems don’t directly address the bigger issue of uncompleted homes.

“However one slices the data, the existing excess supply in the market is likely to take at least another four years to unwind, absent a meaningful pickup in demand,” Loo said in a report Tuesday.

“Increasing supply coming from secondary market transactions – as households, worried about depleting profits from price declines, sell their second or third homes – is an additional drag to this process,” she said, noting that “developers’ inventory is far too large for households to absorb quickly.”

Apartment homes are typically sold ahead of completion in China, making it critical that developers finish constructing the houses if they are to sell more.

But financing struggles and other issues have meant developers have had to delay home delivery times — discouraging future home sales.

On the extreme end, residential construction in the relatively poor province of Guizhou could take well over 20 years to complete, Loo said in an email, while it will likely take at least 10 years in several other provinces such as Jiangxi and Hebei.

Nomura last month estimated the size of unfinished, pre-sold homes in China is about 20 times the size of property developer Country Garden as of the end of 2022.

Real estate and related sectors have accounted for about a fifth to one-fourth of China’s economy.

Ratings agency Moody’s said late Tuesday it expects that share to decline, in-line with Chinese government objectives. However, the firm pointed out the resulting drop in land sales means local governments may face financial strain if they are unable to offset what’s been a driver of more than a third of revenue.

That means Beijing may need to step in, posing “downside risks to China’s fiscal, economic and institutional strength,” Moody’s said. It downgraded its outlook on China’s government credit ratings to negative from stable.

Moody’s expects China’s growth domestic product to slow to 4% growth in 2024 and 2025 and average 3.8% a year from 2026 to 2030. The firm maintained an “A1” long-term rating on China’s sovereign bonds.

Spillover?

Despite persistent property market troubles, Oxford Economics’ Loo doesn’t expect significant spillover to the rest of the economy.

“We think China’s housing downturn will tread a different path than that of the US, Spain, or Ireland 10-15 years ago, and is unlikely to trigger a broader financial crisis,” she said.

In those situations, falling house prices, mortgage failures and bank lending were interlinked, Loo said, pointing out the difference in China: the greater role of policy, state-controlled banks and more stringent mortgage terms.

Other analysts also expect China’s economy will take its own path.

“We do see some similarities between China’s situation and the economic stagnation in Japan after the latter’s property bubble burst in 1991,” S&P Global Ratings said in a report Monday. “However, S&P Global Ratings believes China can avert this outcome, helped by regulatory action and the strength of its banking and corporate sectors.”

Source : CNBC

The post China’s Big Property Market Problem Will Take at Least 4 to 6 Years to Resolve appeared first on Amora Escapes.

Revealed: Abu Dhabi, RAK to Vie With Dubai as Top UAE Real Estate Investment Destinations in 2024

Jeffery Blair — Mon, 18 Dec 2023 11:38:43 +0000

Capital city Abu Dhabi and emerging tourist and gaming spot Ras Al Khaimah (RAK) are predicted to be the top destinations for real estate investments in the UAE in 2024, along with the ever resilient Dubai, promising substantial growth in the coming year, new market research revealed.

Yas Island, Al Reem Island, and Saadiyat Island are projected to emerge as the top three locations by transaction value in Abu Dhabi, while the areas surrounding UAE’s upcoming first-ever casino in RAK are anticipated to clock the highest return on investments for investors next year, the AI-based study by Dubai-based global proptech Realiste said.

“Amidst the ever-shifting landscape of real estate opportunities, three emirates – Abu Dhabi, Ras Al Khaimah and Dubai – will emerge as magnetic hubs for investors in 2024,” the study predicted.

“Each emirate boasts unique strengths and opportunities for investors looking to capitalise on the region’s dynamic growth.”

The Realiste research showed that at $2,365 per sqm, the average cost per square meter property prices in Ras Al Khaimah is significantly lower among other cities with casinos, compared to a staggering $49,911 in Monaco and $15,153 in Singapore, underscoring the substantial potential for property value appreciation in the emirate, highlighting its attractiveness to potential investors.

It also projected a robust return on investments of up to 50 percent for some of the projects in Abu Dhabi’s upcoming and popular islands over the next three years, turning them among the most sought after residential property markets in 2024.

Real estate market boom to spread beyond Dubai in 2024

Abu Dhabi, and Ras Al Khaimah, along with Dubai, beckons as distinct gems for investors in 2024, Realiste said.

Abu Dhabi, epitomizing stability, offers steady organic growth and proven profitability in prime locations, while Ras Al Khaimah, propelled by a groundbreaking casino, stands out with affordable prices and a burgeoning tourism scene.

Meanwhile, Dubai will continue to lead the bull run in the UAE’s real estate market with its innovation and resilience promising substantial growth, with iconic projects showcasing sustainability, the study said.

“Together, these emirates encapsulate an opportunity, where each investment choice signifies a strategic move in the evolving landscape of Middle Eastern real estate,” Realiste said.

Investors could expect over 50% returns in short spans

Abu Dhabi, with its fast diversification with the mix of cultural and entertaining objects, besides hosting more than 100 global events, concerts or festivals annually, is projected to offer both top notch return on investments and high rental yields, luring real estate investors from around the world in the coming year.

The capital city’s high target for international tourist arrivals – its reported target for 2023 is 24 million visitors – will be a growth driver for short-term rental property also, the study said.

Q Property’s upscale projects Maskan and Makany on Reem Hills and Aldar’s Gardenia on Yas Island are among the residential projects which are projected to fetch over 50 percent return, while 9 Yards’ Sea La Vie on Yas Island is estimated to see over 30 percent investment appreciation to investors in just a three-year span.

The Gardenia and Sea La Vie projects are also projected to get over 10 percent rental yields to investors.

“[The Abu Dhabi real estate market] exhibits solid organic growth with lower speculative demand, reducing the risk of sharp declines in property values, making it a highly attractive investment destination,” said Realiste, which operates in over 100 cities around the world.

As for RAK, the Realiste study said the emirate’s real estate prices have seen considerable surge in recent months, following the announcement on the casino opening and riding on the boom in tourist arrivals, leading to an estimated over 25 percent spike in hotel room occupancy growth in 2023.

“The announcement of the first casino in the UAE has propelled Ras Al Khaimah into the spotlight, attracting substantial foreign investments and driving tourism,” the study said, adding that this could propel real estate prices, especially in areas around the casino, in the coming months and years.

Bloomberg estimates potential annual gaming revenue of $6.6 billion in RAK, surpassing even Singapore.

The Realiste research said the total transaction value in RAK’s real estate market continues its upward trajectory, nearly reaching the cumulative value of the entire previous year in the first eight months of 2023.

Dubai will continue to offer high returns to investors

The Realiste AI-based study also predicted continued high price growth in key Dubai areas such as Dubai Hills, Sobha Hartland, and Bluewaters Island, with a projected growth forecast ranging from 18.5 percent to 22.1 percent within one year.

“Dubai’s commitment to cutting-edge urban planning sets it apart. The emirate still represents the most significant earning potential for investors,” Alex Galt, CEO and founder of Realiste, told Arabian Business.

“For example, iconic projects such as the Dubai Hills development showcase a harmonious blend of sustainability, and innovation. In 3 years, property prices in the area have grown by an impressive 83 percent, and in the next 5 years, we forecast a further 43 percent growth, making it an attractive prospect for investors seeking long-term appreciation,” Galt said.

Source : ArabianBusiness

The post Revealed: Abu Dhabi, RAK to Vie With Dubai as Top UAE Real Estate Investment Destinations in 2024 appeared first on Amora Escapes.

Has the Property Market Just Reached a Tipping Point?

Jeffery Blair — Sat, 16 Dec 2023 03:08:03 +0000

A prominent economist has broken ranks to warn Sydney and Melbourne property prices are likely to fall next year after the cash rate hit a 12-year high.

Sydney and Melbourne house prices could fall by as much as 4 per cent in 2024, SQM Research managing director Louis Christopher forecast.

His prediction for moderate declines comes after the cash rate reached 4.35 per cent in November, and contrasts with bank economists’ predictions of continued modest growth next year.

“We’ve reached the point where essentially this is going to create a little bit of a tipping point in the market,” Christopher said. “We’re not forecasting a crash. There is a clear housing shortage out there, to have a crash we need a surplus of housing.

“But can we have a moderate fall in housing prices based on a slowing economy and elevated interest rates? My word, we can.”

He expects price rises in Brisbane (4 per cent to 8 per cent) and Perth (5 per cent to 9 per cent) in contrast to the turnaround he tips for the two largest cities, saying Sydney house prices are likely to range between 4 per cent falls and a flat result in 2024, and Melbourne between 4 per cent falls and a 1 per cent rise.

“We’re expecting price falls for middle and outer ring freestanding houses [in Sydney] offset by some price gains at the top end of the Sydney market and offset by outperforming units,” Christopher said, noting a similar trend in Melbourne.

This base case scenario is based on a cash rate between 4.1 per cent to 5 per cent, population growth slowing to 460,000 or less and unemployment rate increasing to 4.5 to 5.5 per cent.

Christopher said those conditions would create a significant economic slowdown that might skate around a recession but will leave struggling homeowners forced to sell.

“For those who are looking to find a second job to cover those extra mortgage repayments, well, they might struggle to find that second job.”

He said while there would still be cashed-up buyers buying at higher-priced segments of the market, it will not be enough to sustain the price increases achieved this year.

Not everyone agrees. Barrenjoey senior economist Johnathan McMenamin said the chronic imbalance between buyer demand and limited number of homes on the market was preventing the market from reaching its tipping point.

“If we look at stock on the market nationally and even if you look at it in Sydney and Melbourne, it’s still quite suppressed,” McMenamin. “The new flow of listings which has been strong at the start of spring was easily absorbed by accumulated demand.”

But he also said the sheer transfer of intergenerational wealth would continue into 2024, allowing cashed-up buyers, who are less sensitive to rates and have low debt-to-income ratios, to hold up the property market.

“Housing has never been as unaffordable as it is now in terms of buying with a mortgage and the only way to explain the ongoing sales is the type of buyer has changed substantially from somebody who could buy a house more or less by himself to requiring a lot more help or a higher income,” he said.

“These buyers are also receiving assistance from the bank of mum and dad and there’s quite a large wave of intergenerational wealth being transferred, supporting the kids and supporting the families.”

Domain’s chief of research and economics Dr Nicola Powell expected price growth to continue, but at a slower rate, as an increase in homes for sale has reduced buyer competition for properties.

“We have got changing [market] dynamics now, we’ve got new listings rising, total listing supply building and clearance rates are more subdued than we were seeing earlier this year,” she said.

‘But can we have a moderate fall in housing prices based on a slowing economy and elevated interest rates? My word, we can.’

Louis Christopher, SQM Research managing director

“[But] as it stands today I’m still not convinced we’ll see a dip in prices because the underlying undersupply is still going to be the one that trumps, [outweighing the impact of rising rates], particularly as we still have strong population growth.”

While there has been an increase in the number of homes for sale, the proportion of distressed listings has been declining, and was lower annually across all the capital cities on Domain data – and at a record low in Perth, and 18-month low in Sydney and Brisbane.

Powell said the price recovery in the housing market helped to create a buffer for borrowers, putting them in a better equity position.

“It creates that household wealth for mortgage holders and if they do have to sell it helps to insulate them from any deep negative equity,” Powell said.

She expected distressed and forced sales to remain limited, but warned there were still pockets of vulnerability, particularly in the mortgage belts regions of more expensive cities, and areas popular with first home buyers, where borrowers typically had less equity in their home.

Source : TheSydneyMorningHerald

The post Has the Property Market Just Reached a Tipping Point? appeared first on Amora Escapes.

Australian Property Market’s Most Searched for Locations From Overseas Property Seekers

Jeffery Blair — Wed, 29 Nov 2023 15:19:06 +0000

Although Australia’s property market is in the midst of multiple crisis, overseas property seekers are showing their interest, according to PropTrack.

PropTrack’s Overseas Search Report – October 2023 found that buy searches are up 11.5% in the past three months and rent searches are up 7.8%.

Buy and rent searches are now well above pre-pandemic levels and are on track to continue rising now that migration has returned to previous levels, according to PropTrack senior data analyst, Karen Dellow.

Overseas searches for properties on realestate.com.au

Source: realestate.com.au, PropTrack.

In September, The Property Tribune reported that Australia ranked in the top 10 most valuable property markets across the globe.

Renewed interest from China

In the year leading up to September 2020, interest from China severely diminished, falling by 53%.

However, in March 2023, searches for properties to purchase skyrocketed, and returned to pre-pandemic levels. This has also held true for rental searches from China, nearly doubling the volumes seen before the pandemic.

This increase is largely driven by the return of students and migrant workers, according to the report.

In July 2023, arrivals from migrant workers and students hit the highest level since January 2020, averaging around 265,000 new arrivals per month over the last six months.

Furthermore, a quarter of buy and rent searches from overseas come from New Zealand, and their interest has been increasing monthly.

Annual change in buy and rent search volumes from overseas property seekers – September 2023

Source: realestate.com.au, PropTrack.

“Rental searches in particular are a leading indicator of overseas migration and have mirrored the trend of permanent and student arrivals to Australia, illustrating new arrivals’ relationship with the rental market,” said Dellow.

Overseas property seekers are eyeing Melbourne

For the past six months, Melbourne has ranked as the number one searched location on realestate.com.au

“Which is hardly surprising considering it is the first port of arrival for many migrants and is also a major centre of commerce and study,” said Dellow.

The Gold Coast has also attracted a high level of demand from overseas buyers; even among interstate migrants, the Gold Coast emerged as a clear favourite.

Top 20 locations for overseas property seekers

Rank	Site section	Location
1	Buy	MELBOURNE, VIC
2	Buy	GOLD COAST, QLD
3	Buy	BRISBANE – GREATER REGION, QLD
4	Buy	SYDNEY CBD, NSW
5	Buy	PERTH CBD AND INNER SUBURBS, WA
6	Buy	PERTH – GREATOR REGION, WA
7	Buy	SUNSHINE COAST, QLD
8	Buy	ADELAIDE CBD, SA
9	Buy	PERTH CBD, WA
10	Buy	BRIGHTON, VIC
11	Buy	SOUTH YARRA, VIC
12	Buy	BRISBANE CITY, QLD
13	Buy	CAMBERWELL, VIC
14	Buy	CAIRNS – GREATER REGION, QLD
15	Buy	BALWYN, VIC
16	Buy	ARMADALE, VIC
17	Buy	TOORAK, VIC
18	Buy	HAWTHORN, VIC
19	Buy	BRUNSWICK, VIC
20	Buy	CARLTON, VIC

Source : ThePropertyTribune

The post Australian Property Market’s Most Searched for Locations From Overseas Property Seekers appeared first on Amora Escapes.

Property Chiefs See Green Shoots Despite Tough Year Ahead

Jeffery Blair — Mon, 27 Nov 2023 14:41:08 +0000

Leading property executives are confident they have the right strategies in place to tackle what they forecast will be another challenging year for office, retail and industrial properties.

A focus on so-called alternative assets, including healthcare, student accommodation, build-to-rent, as well as marinas, pubs and agriculture, will be the main game for the sector in 2024.

The move to funds management, and the creation of unlisted funds that will own these assets, is also likely to gain momentum.

In a busy week of annual general meetings, chief executives of a range of real estate investment trusts all said 2023 had been tough and predicted that while there are signs of improvements, they will have to be even more vigilant on the balance sheet in the coming 12 months.

The CEOs said they expected disruption and volatility in global real estate markets to continue in 2024.

The annual general meeting season, where shareholders get to meet corporate bosses and vote on their pay, was also marked by a series of newcomers, as the old guard of CEOs take their leave.

New Mirvac boss Campbell Hanan said in his inaugural CEO speech that he believed there was an “incredibly exciting future ahead” for the company. Hanan replaced long-time CEO Susan Llyod-Hurwitz in March.

Hanan told the audience that looking to the 2024 financial year and beyond, the group would focus on key areas including retaining balance sheet flexibility and improving the cash flow resilience of its investment portfolio by increasing its exposure to living sectors and Sydney-based industrial property.

At Lendlease, the remuneration report received a strike amid shareholder concern about executive pay and the weaker underlying conditions for the development business.

Chairman Michael Ullmer said the board shared security holders’ disappointment with the company’s recent financial performance. Lendlease reported a statutory loss after tax of $232 million for the 2023 financial year.

“Apart from health and safety, simplifying the business and restoring Lendlease’s return on equity to our 8-10 per cent target range from 2024 is our most important priority,” Ullmer told the audience. The nonbinding vote against the report was 59.91 per cent, below the 75 per cent required threshold.

In the past year, the global property giant has moved further into funds management and reviewed its development pipeline to balance the short, medium, and long-term projects.

That drove its decision with Google to mutually end the $20 billion development agreements in the San Francisco Bay area.

Mirvac CEO Campbell Hanan.CREDIT: LOUISE KENNERLEY AFR

“In construction, our capability continues to play a critical role in the securing of new work, and the delivery of our urban projects and critical government infrastructure – including for long-term partners such as the Australian Department of Defence,” chief executive Tony Lombardo said.

He added that Lendlease would keep decreasing its exposure to the office market.

“The ongoing instability from inflationary and interest rate pressures, the disruption to global supply chains, and the residual impacts of the pandemic on our industry, has negatively impacted the markets in which we operate,” he said. “To put it simply, many global markets slowed dramatically.”

Its peer, Charter Hall is also boosting its funds management core with group funds under management growing 9.4 per cent for the year to $87.4 billion, driven primarily by property funds under management growth of 9.5 per cent, or $6.2 billion to $71.9 billion.

David Harrison, Charter Hall’s chief executive also said the office market was challenging.

“In office, we also see passing rents sitting below market rents; however, this is variable by submarket,” Harrison said.

“A lot of debate exists around the future of office markets, however, as with other parts of Asia, Australian office markets are expected to see a bifurcation of tenant demand toward modern or modernised office towers in core locations.”

He said Charter Hall would focus on having the largest modern office portfolio in Australia. To upgrade the portfolio, the company will sell assets, after selling $1.3 billion of assets over the past seven years

On the industrial front, Goodman escaped a second strike on its remuneration report.

Greg Goodman, co-founder and chief executive, said the focus would be on developing data centres across the country.

“Data centres are measured in power, rather than square metres, and Goodman has delivered 0.6 gigawatts of powered sites,” Goodman said.

“One of the many advantages we have in this space, is our significant land bank around the world, where we’ve got options for industrial development, or in specific cases where we can get the power and the planning, data centres.”

Greg Goodman is the founder and chief executive of property giant Goodman Group.CREDIT:RHETT WYMAN

Data centres are currently about 25 per cent of Goodman’s work in progress, and there’s opportunity in its major markets around the world.

“We expect to develop this existing power bank over the next seven to 10 years,” he said.

Source : TheSydneyMorningHerald

The post Property Chiefs See Green Shoots Despite Tough Year Ahead appeared first on Amora Escapes.

Lower Commercial Property Sales and Leasing Hit CBRE’s Bottom Line

Jeffery Blair — Thu, 09 Nov 2023 13:13:55 +0000

CBRE Group’s profits fell by more than 55% in the most recent quarter as the commercial real estate market continued to struggle under the pressure of higher interest rates.

And company execs don’t expect a significant recovery in the commercial property sector until the second half of 2024.

The Dallas-based global property firm reported $190.6 million in net income in the most recent quarter, compared with $466.6 million in profits in the third quarter of 2022. The company’s net quarterly revenue was down 4.2% year-over-year to $4.4 billion.

“Commercial real estate capital markets remained under significant pressure in the third quarter,” CBRE CEO Robert Sulentic said in a statement. “As a result, we experienced a sustained slowdown in property sales and debt financing activity, which drove the decline in core earnings-per-share.

“This decline was exacerbated by delays in harvesting development assets which we will sell when market conditions improve.”

Increases in interest rates this year have caused commercial building costs to balloon and have sharply slowed investment property purchases across the country. Worries about the economy and changes in the workplace have slowed leasing.

“The unexpected jump in rates has pushed back the capital markets recovery,” Sulentic said.

CBRE’s revenue from property sales dropped by about 39% year-over-year in the quarter ending with September. And the company’s real estate development operations lost $22.1 million in the quarter “reflecting a delay in asset sales amid the uncertain capital markets environment.”

CBRE owns Dallas-based developer Trammell Crow Co.

The commercial property firm’s workplace solutions operations grew revenue by almost 17% in the quarter. CBRE saw revenue gains in its facilities and project management businesses. Loan servicing revenue rose by 4% from a year earlier.

“Property prices are gradually declining and we believe this process won’t be complete and transaction activity won’t rebound materially until investors are confident that interest rates have peaked and credit becomes readily available,” Sulentic said in a conference call with investors and securities analysts. “We now believe this rebound is unlikely to occur until the second half of next year at the earliest.

“It’s going to take longer for interest rates to come down,” he said. “It’s going to take longer for debt in particular to become available for real estate transactions.”

Because of continued industry declines, CBRE said it plans to further trim expenses. The company in the last year has reduced its workforce and delayed some projects — including a new Uptown office tower that was expected to house the company’s headquarters.

“We will be reducing costs across our lines of business,” said CBRE chief financial officer Emma Giamartino. “We have already targeted $150 million of reductions.”

At the same time, the company continues to evaluate merger and acquisition opportunities, CBRE top officers said.

“We are looking at a number of deals,” Giamartino said. “But pricing has become more of a challenge than it was a year ago or even six months ago.”

CBRE isn’t expecting a rebound in its property sales and leasing business until sometime in 2024.

“Transactions are not going to return until the back half of next year where we thought they were going to return late this year early next year,” Sulentic said.

That’s caused CBRE to change its earnings forecast for all of 2023. The company anticipates earnings per share this year to drop by more than 30%.

“About a third of that is related to capital markets and about a third is related to development,” Giamartino said.

Source : TheDallasMorningNews

The post Lower Commercial Property Sales and Leasing Hit CBRE’s Bottom Line appeared first on Amora Escapes.