Declining cap rates, rising interest rates, and boom in Chinese investors
Jul 1, 2013
Here are the news stories you may have missed this week:
Wall Street Journal: Climbing rates seen stalling rise in values
The pace of long-term gains in property values over the past four years is expected to slow as interest rates rise. While some REIT investors are selling, others warn that property values have increased along with rising interest rates in the past, and that historically, current interest rates are still quite low. Head over to the Wall Street Journal for more information on how investors are reacting.
New York Times: Chinese investors pursue U.S. property deals
The Wanda Group isn’t the only Chinese firm seeking to invest in U.S. real estate. Chinese businessman Zhang Xin invested in part of New York City’s General Motors Building, due in part to the Chinese government’s financing for the deal, and investors are also training their sights on U.S. housing inventory. Chinese and Hong Kong investors are now second only to Canada in foreign investment in U.S. housing. For a full overview of the trend, check out the article at the New York Times.
Bloomberg: Wall Street’s $8 billion CMBS in limbo as bulls retreat
Due to the Federal Reserve’s comments about potentially curbing stimulus efforts, the CMBS market may have its worst month in two years, after initial outlooks made 2013 look like a strong performer. Wall Street firms have been increasing commercial mortgage origination, which is now backfiring as banks prepare $7.5 billion in loans. As a result, landlords for all property types are now facing more expensive refinancing. For more information on the market will perform, go to Bloomberg.com.
Forbes: Bank earnings: look for these 3 areas of risk
The Office of the Comptroller of the Currency (OCC) released its Semiannual Risk Perspective, which warns that despite a positive outlook for 2013, banks remain anxious over slow growth in revenue and core profits. The report highlights three specific threats to national banks and federal savings and loan associations: commercial and industrial lending, loan-loss provisions, and commercial real estate trends. Visit Forbes for more on the three areas of risk.
REIT.com: Cap rates decline amid slow commercial real estate recovery
A new report from PwC reveals that cap rates are falling due to high demand from investors and low interest rates. In the second quarter of 2013, the overall cap rate in 34 U.S. markets fell to 6.91%. However, as cap rates continue to sink, some investors worry that assets in New York, San Francisco, Los Angeles, and other first-tier cities are becoming overpriced. Get more on the report at REIT.com.
Author: Raymond T. Cirz