Real Estate Investments Report 2012
For those that are still looking for a bottom in real estate prices, here are a few things to consider.
1) In recent years, for most countries Real Estate construction has been a major factor of their GDP, this in turn has seen excesses build up everywhere, in Asia this is the most evident, except India/China, where the first home buyers market demand still remains, elsewhere there are huge tracks of buildings just sitting idle.
2) High land values of the past years have seen projects that come onto tap, have to be prized higher than the past as such, the sellers are quoting rates which do not justify to the buyers and the buyers are looking for deals, which have yet to materialize, hence a market where very little trading happens become evident.
What happens next?
This quite market scenario is bearish, investors who continue to remain long within their portfolio will either have to make a choice, to continue holding up rates, similar to a trader who chases a buy with a lowered out of market bid, or a seller who wants to sell, but the prices he wants are always above the market.
In general a quite market, with a bearish bias.
As the dollar comes back, most export oriented economies will take the route of devaluation and rightly so, fiscal indiscipline will be paid by lowering its cost, it has always been this way, in dollar terms most of assets priced today will become relatively cheaper and a situation such as that after the 1995 real estate peak, Asia could witness lower prices in real estate and a stronger dollar, a double whammy for foreign investors.
Prime Land values will hold up.
Land values within city centers will continue to be an institutional play and as a hedge against the hyper inflationary scenario. Here again, it all depends on the level of ongoing creative destruction, since the political parties may continue with their populace preferred policies and scarcity and availability of cheap prime land is a thing of the past, we could witness a margin squeeze as developers chose to build affordable housing instead of luxury.