Amid investors, thoughts remain on the enigmatic question of “how long can this last?” After eight years of economic expansion, investors are starting to wonder when the real estate contraction will happen. Ryan Severino, chief economist for JLL in New York, believes “we have at least a couple of years before we start to have that question about is the clock ticking or not.” Some would argue this is a rather optimistic opinion and align their sights more so with the ‘Skyscraper Effect,’ which is an economic indicator suggesting recession follows the construction of the world’s tallest buildings.
There is no arguing that we are late in the cycle, but depending on the market sector and asset type, additional investigation is required. Softening areas include central business districts (CBD), high street retail, and CBD multifamily. However, strength continues in suburban multifamily, class B and C multifamily, suburban office, and industrial sectors. It is also important to note that market cycles vary greatly based on geography as “[t]here is no such thing as a national real estate market. Every market and economy is local in nature,” adds Ted C. Jones, Ph.D., chief economist and senior vice president at Stewart Title Guarnty Co. in Houston. Jones along with others, forecast a bullish overall outlook on the economy. Keith Knutsson of Integrale Advisors, states “there is still upside potential for the remainder of this fiscal year, however, market shifts will present themselves in the near future.” Employment rates will remain high, but there will be lower levels of growth according to the Urban Land Institute (ULI). New Trump fiscal stimulus policies remain in question, particularly with the tax reform, which will greatly affect the amount of growth.
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7/21/2017 0 Comments IMF Board is set to Bailout GreeceThe International Monetary Fund’s recent activities have led to the approval of the latest Greek bailout. The news keeps pressure on Europe to further deliver debt relief and will prevent Greece from raising capital in markets for the time being. Greece’s IMF bailout sets a debt ceiling for the central government around €325 billion, accounting for the country’s current debt and the bailout funds it receives from its European creditors. “The IMF board has approved Greece’s bailout, in part as a reaction to current levels of debt, unemployment, and GDP which have been deemed unsustainable by the global community” said Keith Knutsson of Integrale Advisors. According to an earlier version of the document prepared in April, the ceiling of €325 billion was initially imposed on the general government debt, giving Greece a buffer of around €10 billion. The following provisions will force Greece to focus on implementing reforms agreed under the bailout such as amending the pension system and privatizing public industries. The European Central Bank, International Monetary Fund, the administration of Athens have not been to reach a viable solution for years. However, the beginning of the country’s third bailout program should provide the necessary relief for Greece moving forward. The involved parties reached a compromise last month when the Europeans agreed to a limited aspect of debt relief that will be implemented after the bailout ends. The IMF agreed to support a new program “in principle,” but would only distribute financing once Greece takes the necessary steps to fixing the structural issues in their economy. Despite the lack of a clear and feasible solution, the result of recent bailout negotiations created a sense of positive momentum for the Greek economy. The country’s borrowing costs have dropped, Moody’s rating agency upgraded the economic outlook, and the European Commission suggested that the EU should no longer enforce disciplinary measures. Despite the challenges faced, the Greek government is planning to enter the bond markets in the coming days with an issuance that will be mainly covered through swaps of a bond program that expires in 2019.2016 was a standout year for real estate performance in Ireland. According to the Financial Times, Ireland was the “fastest-growing economy in the EU.” CBRE’s Europe Real Estate Market Outlook 2017 forecasted this trend will continue into 2017 and 2018. The research cited rental incomes increasing 11% year on year (Q3 2015 – Q3 2016) largely due to high demand outweighing the low supply in the housing market. However, the Irish government addressed the supply concern by initiating a number of development projects. Many of these projects are now transitioning from conceptual or early planning phases to the beginning of site work. Fortunately, multi-family investors should expect rental inflations to continue through the remainder of 2017 and into the coming years.
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October 2018
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