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Investors Are Prime And Ready To Buy

Posted By Chada Trithavornyuenyong on May 24, 2020 in Investments

The world’s biggest real estate investors are preparing to strike gold. With the world economies sputtering and commercial real estate prices are expected to fall. 

Caused by the global pandemic of the coronavirus, this is an opportunity that comes once-in-a-lifetime. 

Sellers know they have to concede, but the key question is how much? Sellers are currently willing to offer a 5% discounts against the pre-pandemic prices, but buyers to hedging for much deeper discount. This divide has put a complete halt in real estate transaction. 

“In simple terms, investors are looking for super deep discounts: distressed and failing properties,” said Paul Xumsai, President of VR Global Property based in Thailand. “We are competing on a global market. If I’m going to have a good year, I need to demonstrate to my investors that I got the best deal on the planet.”

According to data firm Preqin Ltd, private equity firms across the world hold an estimated US$328 billion in dry powder for real estate investment.

“Our Hong Kong and Singaporean investors only, have an estimated $4 billion for commercial real estate,” added Paul Xumsai, “prior to the global pandemic have been chasing the yield, now they are bargain hunting.”

For now, social distancing rules and travel restrictions have halt transactions and led to speculation that prices will drop in coming months.

The volume of deals in Europe plunged 65% in April from a year earlier, according to Tom Leahy, a London-based senior director at Real Capital Analytics Inc. U.S. and Asian markets faced similar drops.

Asia, where the pandemic began, is likely to recover faster than Europe or America. According to Richard Barkham, chief economist for CBRE Group Inc. Transactions in the Americas will fall an estimated 35% this year, compared with a roughly 25% decline in the Asia-Pacific region, he said.

With the uncertainty of the pandemic, buyers and sellers are finding it very hard to price things right. Proof is really going to be when the markets start to reopen when buyers and sellers find a middle ground. 

Once the first few transactions occurs, the market may experience a domino effect. Until then, investors are just sitting on the stands watching.

 

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