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Global real estate funding has declined in 2022. According to MoneyTransfers.com, only 50 billion dollars were raised by real estate funds in 2022, about one-third of the amount raised in 2021. The main reasons for this decline are due to global issues, including supply-chain obstructions and high inflation, which are negatively affecting planned construction projects.
MoneyTransfers CEO Jonathan Merry commented on the report. He said
The global real estate market is slowing down and this is reflected in the fundraising figures. Investors are becoming more cautious as they see other asset classes decline in value. However, it is not all doom and gloom for the real estate market. Despite the challenges, there are still opportunities for those willing to take a risk. There will always be a demand for housing and office space, so there is potential for growth in the long term.
MoneyTransfers CEO Jonathan Merry
The Tides Might Shift
Europe and Central America have recently seen a rise in houses for sale. The reason behind the surge is investors try to avoid refinancing at a higher interest rate. Meanwhile, sellers are willing to take a current 10% to 15% pricing cut rather than higher reductions in six months.
Despite the same tendencies in the Asia Pacific, there are no hints of increasing the interest rates. Investors are reevaluating their pricing expectations in Australia, New Zealand, and Korea due to increased interest rates.
Also, investors are monitoring rent increases, exit cap rates, and borrowing costs. The disparity between yields and the cost of financing has held steady in other markets. Furthermore, the interest rates have mostly stayed stable. This pattern may encourage investment activity in these markets during H2 2022.
Investors are typically less driven to take profits so fast in markets with stable interest rates. Many people, however, are pickier regarding possible purchases’ standard and location.
The market situation is shaky, and it will take strategies to stabilize. The players might drive sector stability by stabilizing the economy and managing inflation.
Will the Demand Push the Price?
Demand for industrial real estate and multifamily property pushes the rent higher. However, inflation rates lower tenants’ ability to pay higher rents. The situation is a paradox that limits the law of demand.
The two asset groups, self-storage facilities, and hotels, are particularly appealing in an inflationary environment. Due to their demand, it is easy to reprice them.
In an inflationary environment, real estate funds have to be nimble. The strategy for one market might not work in another. The key is to be proactive and plan to adapt to changing conditions. Keeping an eye on long-term prospects while being mindful of the current market situation is essential. By understanding the trends, investors can make informed decisions about where to allocate their funds.
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