Real estate survey 2014: New era of financing emerges from the ashes
Liquidity is up and leverage is down. Alternative lenders are stepping in where banks can no longer tread. While the period of re-regulation may not yet be over, real estate finance is starting to look in rude health once again.
The recovery of the global real estate market from the devastating toll inflicted by the financial crisis is continuing to gather pace, with investment almost back to 2008 levels and growing confidence fuelling increased risk appetite.
However, real estate 2.0 looks different in many ways. Asia Pacific has surged ahead of North America and Europe to consolidate its position as the largest market, accounting for almost 50% of the $1.18 trillion invested globally in 2013, according to commercial real estate firm Cushman & Wakefield. Asia is responsible for around 30% of cross-border capital flows, fuelled by long-term investment from sovereign and institutional funds looking for steady returns.
Global financial regulation has been informed by the explicit aim of preventing a repeat of the over-extension of credit and mispricing of risk that allowed the real estate bubble to inflate. Regulators in fast growing hotspots in Asia and Europe have taken steps to cool the market which, combined with growing anticipation of interest rates beginning to rise, is helping to rein in expectations for price growth.
“Rising demand for UK housing appears to have been capped by the measures regarding the Mortgage Market Review (introduced in April to curb lending) together with the prospect of the Bank England taking action to cool the market, which it has done,” says Stephen Lewis, chief economist at ADM Investor Services.