December 12, 2007
Of course commercial real estate is going to fall. Why? For the exact same reason residential real estate is falling. But, there hasn’t been an oversupply of commercial real estate, you say. Well, the oversupply is not the core reason why residential is falling right now. Residential RE’s problem is that easy, cheap money brought upon wreckless, imprudent speculation from players who were not well versed in the real estate game – and even those who should have known better. The current oversupply is a byproduct of that liquidity induced speculation. Why split hairs? Because the devil is in the details. The downfall of CRE is the rampant speculation that caused many to significantly overpay for assets that are quite illiquid and take significant expertise and time to improve (or even sell), even incrementally. Not only did they overpay, but they applied significant leverage as well, much more than the industry norm. Seeking Alpha Reports
December 12, 2007
The US-based Jones Lang LaSalle (JLL), the world’s leading integrated global real estate services and money management firm, is planning to strengthen its position in India. The firm, which recently merged with Trammel Crow Meghraj, a property consultant based in Mumbai, will bring in its investment management business to India and has plans to invest around $1 billion in the country’s burgeoning property market.
“We don’t have any presence in India’s investment management service sector. Now, we have lined up plans to bring in the business to the country. We have also earmarked close to $20 billion for the Asia-Pacific region, and India would get anywhere close to 5% of the amount,” said, Jones Lang LaSalle president and chief executive officer, Colin Dyer. Reports
December 12, 2007
The subprime mortgage crisis in the United States is spreading into Europe, notably the United Kingdom. Real estate values are deemed inflated throughout the continent. One exception may be Macedonia. Purchase prices here have stagnated in the last few years and rental rates have actually declined considerably. There is good reason to think this will change and soon: new financing vehicles are on offer and, as real incomes increase, there is a stark mismatch between geometrically-growing demand and arithmetically-increasing supply.
Moreover, impressive improvements in the business climate led to the entry into retail, manufacturing, and services of global giants as foreign direct investors. These need or build shopping malls, office space, and parking lots. Peter Roth, the General Manager of Soravia Macedonia, which bought the Business Center in Skopje last year, predicted, in a statement quoted in “Vecer”, a Macedonian daily: ” I expect the development of real estate, bigger competition, but also higher prices. I think that in the future investments will flow not only to Skopje, but also to Ohrid, Gevgelija and other cities, near the border with Greece.” “In the near future small shops in buildings will disappear, problems with parking spots would be overcome, and expensive rents would grow further,” – concluded the exuberant article.
December 3, 2007
You can’t blame America’s homeowners for feeling hopelessly confused. From suburban porches and city terraces, they’re gawking at a housing world gone mad. Just 18 months ago, folks on a tony Linden Lane or a leafy Boxwood Court were astounded to see the colonial their neighbors bought for $600,000 in 2000 sell for $1.5 million after multiple bids. Now they’re just as bewildered to watch the same model across the street go begging for months at $1.1 million without a single offer. Fortune reports
The millions of Americans who believed yesterday’s happy talk about housing are now paying the price, from couples who stretched to buy second homes, to true believers who drove the Florida condo craze, to executives who can’t take that great new job in Charlotte without suffering a huge loss on the house purchased at the bubble’s peak in Sacramento.
November 17, 2007
When a market goes through uncertain times, investor caution reigns. And whether you’re talking about the housing market or the financial services sector, there’s been so much bad news lately that it makes sense for buyers and investors to remain wary.
But the good news is that market slumps often result in good buys, and solid investments get tagged with bargain prices due to the volatile market. One place to look for these deals is the housing sector, where worries about a continuing dip in home prices are keeping many buyers on the sidelines, and keeping a lid on prices. Looking across the country for undervalued markets, we came up with five picks for city markets or submarkets that are cheap based on what their particular market fundamentals suggest. Forbes reports
November 17, 2007
The impact of the U.S. mortgage market crisis on the underlying economy could be “dramatic” as leveraged investors may need to scale back lending by up to USD 2 trillion, according to investment bank Goldman Sachs.
Chief U.S. economist Jan Hatzius said a “back-of-the-envelope” estimate of credit losses on outstanding mortgages, based on past default experience, was around USD 400 billion.
But unlike stock market losses, which are typically absorbed by “long-only” investors, this mortgage-related hit is mostly borne by leveraged investors such as banks, broker-dealers, hedge funds and government-sponsored enterprises.
And leveraged investors react to losses by actively cutting back lending to keep capital ratios from falling — A bank targeting a constant capital ratio of 10 percent, for example, would need to shrink its balance by USD 10 for every USD 1 in losses.
“The macroeconomic consequences could be quite dramatic,” Hatzius said in the note to clients. “If leveraged investors see USD 200 billion of the USD 400 billion aggregate credit loss, they might need to scale back their lending by USD 2 trillion.”
“This is a large shock,” he said, adding the number equates to 7 percent of total debt owed by U.S. non-financial sectors.
“It’s basically another downside risk to the macroeconomy at a time when the macroeconomy already isn’t doing that well,” Hatzius told CNBC.
He said such a shock could produce a “substantial recession” if it occurred over one year, or a long period of sluggish growth if it occurred over two-to-four years.
Hatzius underscored the macroeconomic nature of the shock in his interview with CNBC.”I don’t think there’s a direct stock market implication from this, perhaps with the exception that it does point to a slow-growth environment, significant risk of recession, and that’s probably in an envrionment in which the cyclical sectors are going to underperform.”
One of a number of caveats outlined in the report was that baseline economic forecasts may already include significant reductions in the pace of mortgage lending. But the conclusion remained a gloomy one regardless. “The likely mortgage credit losses pose a significantly bigger macroeconomic risk than generally recognized,” he wrote.
“While the uncertainty is large, the associated downward pressure on lending raises the risk of significant weakness in economic activity.”
November 17, 2007
THE Australian superannuation industry’s continuing strong growth will drive increased investment in offshore real estate, according to forecasts from CB Richard Ellis.
Its executive director of research for the Pacific region, Kevin Stanley, said the $1 trillion superannuation sector was tipped to almost double in size over eight to 10 years – growth that would compel investors to look at global investment opportunities. More Reports