Construction sites are photographed in Frankfurt, Germany, July 19, 2023. REUTERS/Kai Pfaffenbach Acquire Licensing Rights
BERLIN, Sept 22 (Reuters) – German housing prices fell by the most since records began in the second quarter as high interest rates and rising materials costs took their toll on the property market in Europe’s largest economy, government data showed on Friday.
Residential property prices fell by 9.9% year-on-year, the steepest decline since the start of data collection in 2000, the federal statistics office said. Prices fell by 1.5% on the quarter, with steeper declines in larger cities than in more sparsely populated areas.
In cities such as Berlin, Hamburg and Munich, apartment prices fell by 9.8% and single and two-family house prices dropped by 12.6% on the year.
For a decade, low interest rates have fuelled a property boom in Europe’s largest real estate investment market. A sharp rise in rates and increasing construction costs have put an end to the run, tipping a string of developers into insolvency as deals froze and prices fell.
Building permits for apartments in Germany declined 31.5% in July from a year earlier, the statistics office disclosed on Monday, as construction prices rose by almost 9% on the year.
Germany aims to build 400,000 apartments a year, but has struggled to meet the goal.
German housing industry association GdW on Friday sounded the alarm over the situation calling for government support for construction companies.
“The construction crisis in Germany is getting worse day by day and is increasingly reaching the middle of society,” GdW, which represents around 3,000 housing companies nationwide, said in a statement.
GdW called for a cut in value added tax (VAT) to 7% from the current level of 19% for affordable rentals and government funding loans with a 1% interest rate to support companies.
The government is scheduled to hold a summit with the industry on Monday to discuss the situation.
GdW and the Haus&Grund owner’s association said they were boycotting the summit as they had too little influence on its agenda.
The German cabinet plans to present an aid package for the industry by the end of month after announcing plans to promote the construction sector, including reducing regulatory and bureaucratic requirements.
Reporting by Riham Alkousaa and Klaus Lauer, editing by Kirsti Knolle and Sharon Singleton
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LITTLETON, Colorado, Sept 19 (Reuters) – The deepening debt crisis in China’s construction sector – a key engine of economic growth, investment and employment – may trigger an unexpected climate benefit in the form of reduced emissions from the cement industry.
Cement output and construction are closely correlated, and as China is by far the world’s largest construction market it is also the top cement producer, churning out roughly 2 billion tonnes a year, or over half the world’s total, data from the World Cement Association shows.
The heavy use of coal-fired kilns during manufacturing makes the production of cement a dirty business. China’s cement sector discharged 853 million tonnes of carbon dioxide in 2021, according to the Global Carbon Atlas, nearly six times more than the next largest cement producer, India.
The cement sector accounts for roughly 12% of China’s total carbon emissions, according to Fidelity International, and along with steel is one of the largest greenhouse gas emitters.
But with the property sector grinding to a halt due to spiralling debt worries among major developers, the output and use of cement are likely to contract over the next few months, with commensurate implications for emissions.
HOUSING SLUMP
The property markets account for roughly a quarter of China’s economy, and for years Beijing has used the sector’s substantial heft to influence the direction of the rest of the economy by spurring lending to would-be home buyers and fostering large scale construction projects.
But the big property developers racked up record debt loads in recent years that have forced borrowing levels to slow, stoked concerns among investors, and slowed spending across the economy.
China Evergrande Group, once the second largest developer, defaulted on its debt in late 2021, while top developer Country Garden has drained cash reserves to meet a series of debt payment deadlines in recent months.
Fears of contagion throughout the property industry has spurred households to rein in consumer spending, which has in turn led to deteriorating retail sales and further economic headwinds.
Beijing has stepped in with a slew of measures designed to right the ship, including easing borrowing rules for banks and lowering loan standards for potential home buyers.
But property prices in key markets remain under pressure, which has served to stifle interest among buyers and add to the pressure on investors and owners.
CEMENT CUTS
With construction activity across China slowing, and several major building sites stopped completely while tussles over debt payments among developers continue, cement output is likely to shrink to multi-year lows by the end of 2023.
During the March to August period, the latest data available, total cement output was 11.36 million short tons, down 2 percent from the same period in 2022 and the lowest for that period in at least 10 years, China National Bureau of Statistics data shows.
In addition to curtailing output in response to the bleak domestic demand outlook in the property sector, cement plants may be forced to curb output rates over the winter months as part of annual efforts to cap emissions from industrial zones during the peak season for coal heating.
Some cement producers will likely look to boost exports in an effort to offset lower domestic sales, and in July China’s total cement exports hit their highest since late 2019.
But Chinese firms will face stiff competition from lower-cost counterparts in Vietnam, which are by far the top overall cement exporters and already lifted overall cement shipments by close to 3% in the first half of 2023, data from the Vietnam National Cement Association (VNCA) shows.
Some Chinese firms may be prepared to sell exports at a loss for a spell while they await greater clarity over the domestic demand outlook.
But given the weak state of global construction activity amid high interest rates in most countries, as well as the high level of cement exports from other key producers such as India, Turkey, United Arab Emirates and Indonesia, high-cost Chinese firms may be forced to quickly contract output to match the subdued construction sector.
And if that’s the case, the sector’s emissions will come down too, yielding a rare climate benefit to the ongoing property market disruption.
The opinions expressed here are those of the author, a columnist for Reuters.
Reporting By Gavin Maguire; Editing by Miral Fahmy
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
[1/2]A newly constructed home available for sale is pictured in a new housing development area in Vista, California March 20, 2012. REUTERS/Mike Blake/File Photo Acquire Licensing Rights
Aug 23 (Reuters) – Sales of new U.S. single-family homes rose in July, as an acute shortage of existing homes drove buyers to new units.
New home sales shot up 4.4% to a seasonally adjusted annual rate of 714,000 units last month, the Commerce Department said on Wednesday. The sales pace in June was revised to 684,000 units from the previously reported 697,000 units.
Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, would rise to a rate of 705,000 units.
New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales increased 31.5% on a year-on-year basis in July, the largest annual rise since April 2021.
The median new house price in July was $436,700, a drop of 8.7% from a year ago. The annual price decline in July was the largest since April, which was the biggest drop in three years.
The inventory of existing homes is near historically low levels as mortgage rates hit the highest levels since 2000, dissuading existing home owners who are locked into low rates from putting their homes on the market.
The shortage of existing home inventory is pushing potential buyers towards new houses and driving a flurry of new construction.
At the same time that the median price for new homes fell, the median home price for existing homes increased on an annual basis in July, according to a report released on Tuesday, as the shortage of properties offset the impact of high mortgage rates that had dampened demand in prior months.
Despite the relative strength of new home sales, the combined rate of both new and existing home sales is the lowest since January. Existing home sales constitute the majority of the market.
Tepid home sales volume, in tandem with record-breaking mortgage rates, the renewed house price appreciation and an acute supply shortage, could complicate the stability of the overall housing market.
Home prices were initially the most sensitive to the Federal Reserve’s interest rate hikes – the U.S. central bank has raised rates by 5.25 percentage points since March 2022 – but have stabilized after falling into recession and are still adding significant upward pressure to overall inflation.
New home sales in the Midwest increased 47.4%, the biggest rise on a monthly basis since September 2010. They also rose 21.5% in the West, a region that has experienced the most significant price declines in the past year. They fell by 2.9% in the Northeast and by 6.3% in the densely populated South.
There were 437,000 new homes on the market at the end of last month, up from 428,000 in June. At July’s sales pace it would take 7.3 months to clear the supply of houses on the market, down from 7.5 months in June.
Reporting by Safiyah Riddle; Editing by Paul Simao
Our Standards: The Thomson Reuters Trust Principles.
[1/2]A “For Rent, For Sale” sign is seen outside of a home in Washington, U.S., July 7, 2022. REUTERS/Sarah Silbiger/File Photo Acquire Licensing Rights
Aug 22 (Reuters) – U.S. existing home sales dropped to a six month-low in July as home owners who are locked into cheap mortgages refrained from selling their properties with the cost of new mortgages for another home at the highest levels in decades.
That limited inventory, however, helped drive prices higher on a year-over-year basis for the first time since January.
Existing home sales fell 2.2% in July to a seasonally adjusted annual rate of 4.07 million units, the lowest level since January, from an unrevised 4.16 million units in June, the National Association of Realtors said on Tuesday. Economists polled by Reuters had forecast home sales would be little changed at 4.15 million units.
Sales fell in the Northeast, Midwest and South, but rose in the West, where home prices have fallen most sharply in the past year. All regions experienced annual sales declines.
Home resales, which account for a big chunk of U.S. housing sales, fell 16.6% on a year-on-year basis in July.
Home prices have bottomed out after being pressured by the Federal Reserve’s aggressive interest rate hikes, but the persistent shortage of properties for sale could limit any rebound as many prospective buyers are forced out of the market.
Mortgage rates have surged again recently to the highest levels in decades, with the average rate on the popular 30-year fixed-rate mortgage topping 7% in the latest week, according to mortgage finance giant Freddie Mac.
There were 1.11 million previously owned homes on the market last month, up 3.7% from a month earlier but down 14.6% from July 2022. At July’s sales pace, it would take 3.3 months to exhaust the current inventory of existing homes, up from 3.2 months a year ago.
A four-to-seven-month supply is viewed as a healthy balance between supply and demand. The median existing house price rose 1.9% from a year earlier to $406,700 in July, the fourth time it has topped $400,000.
“Two factors are driving current sales activity – inventory availability and mortgage rates,” said Lawrence Yun, the NAR’s chief economist. “Unfortunately, both have been unfavorable to buyers.”
‘LOCK-IN EFFECT’
The dearth of existing houses on the market has helped bolster new home construction and sales in recent months. The NAR predicted that total resales in 2023 will fall 12.9% from 2022, at the same time that total new home sales in 2023 will increase by 12.3%.
The Commerce Department will report new home sales data for July on Wednesday. Economists polled by Reuters see a modest uptick in transactions. New home sales have outperformed existing home sales so far this year.
Properties typically remained on the market for 20 days in July, up from 14 days a year ago. Seventy-four percent of homes sold in July were on the market for less than a month. First-time buyers accounted for 30% of sales, up from 29% a year ago.
Sales fell the least for homes priced at more than $1 million as supply was less constrained relative to demand than for lower-value homes, Yun said.
All-cash sales accounted for 26% of transactions compared to 24% a year ago. Distressed sales, including foreclosures, represented 1% of transactions, essentially unchanged from June and the previous year.
Yun said it was “anyone’s guess” as to when mortgage rates might begin easing, and some economists don’t expect much relief until 2024.
“Forecasting mortgage rates in the near term is very difficult, but it’s our expectation that mortgage rates will begin to normalize next year,” said Matthew Walsh, an economist at Moody’s who focuses on the housing market.
That could encourage some home owners to resell and look for more new housing, he said, but it could be a while before current rates can compete with the mortgages that the majority of existing home owners secured before interest rates climbed.
“We expect that lock-in-effect will remain for quite some time,” Walsh said.
Reporting by Safiyah Riddle; Editing by Paul Simao
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON, July 26 (Reuters) – Sales of new U.S. single-family homes fell in June after three straight monthly increases, but the trend remained strong as an acute shortage of previously owned homes underpins demand.
New home sales dropped 2.5% to a seasonally adjusted annual rate of 697,000 units last month, the Commerce Department said on Wednesday. May’s sales pace was revised lower to 715,000 units from the previously reported 763,000 units. May sales pace was the highest since February 2022.
“The data remain consistent with and provide further confirmation of a bottoming out in housing activity, with the three-month average of sales rising in every month since November 2022,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, would drop to a rate of 725,000 units.
New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales increased 23.8% on a year-on-year basis in June.
With the inventory of existing homes near historically low levels and multiple offers on some properties, potential buyers are seeking out new houses, driving up homebuilding. Many homeowners have mortgage loans with rates below 5%, reducing the incentive to put their houses on the market.
The rate on the popular 30-year fixed mortgage is just under 7%, according to data from the Mortgage Bankers Association.
The shortage is also boosting house prices, which had been in retreat or declining earlier this year as higher mortgage rates pushed buyers to the sidelines. According to the National Association of Home Builders, fewer builders were offering incentives, including cutting prices to increase sales.
While the overall the housing market continues to stabilize, higher mortgage rates and the renewed house price appreciation could delay a recovery. The Federal Reserve is expected to raise interest rates by 25 basis points on Wednesday after keeping borrowing costs steady in June. The U.S. central bank has hiked its policy rate by 500 basis points since March 2022.
Stocks on Wall Street were trading lower. The dollar fell against a basket of currencies. U.S. Treasury prices rose.
HOUSING STABILIZING
There are concerns that signs of life in the housing market could compel the Fed to push interest rates even higher, which some economists said would be a mistake. They argued that there was a huge pipeline of homes still to be completed, especially multi-family housing units.
A recession if, accompanied by steep job losses and a surge in mortgage delinquencies, would force some homeowners to put their houses on the market. These factors could boost supply.
“The current equilibrium that the homebuilders are enjoying may be short-lived,” said Richard de Chazal, macro analyst at William Blair. “Given what we view as an unstable foundation, Chair (Jerome) Powell should be careful about just how much weight he places on this market.”
Last month, new home sales jumped 20.6% in the Northeast and 4.3% in the densely populated South. But they declined 13.9% in the West and tumbled 28.4% in the Midwest.
About a third of the new homes sold last month were in the $300,000-$399,999 price bracket.
The median new house price in June was $415,400, a 4.0% drop from a year ago. The average house price was nearly $500,000.
There were 432,000 new homes on the market at the end of last month, up from 429,000 in May. Houses under construction made up 60.2% of inventory, with those yet to be started accounting for 23.1%.
At June’s sales pace it would take 7.4 months to clear the supply of houses on the market, up from 7.2 months in May.
Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON, July 20 (Reuters) – U.S. existing home sales dropped to a five month-low in June, depressed by a chronic shortage of houses on the market that slowed the pace of decline in annual house prices.
Existing home sales fell 3.3% in June to a seasonally adjusted annual rate of 4.16 million units, the lowest level since January, the National Association of Realtors said on Thursday. Economists polled by Reuters had forecast home sales would drop to a rate of 4.20 million units.
Sales rose in the Northeast and were unchanged in the Midwest. They fell in the West and the densely populated South.
Home resales, which account for a big chunk of U.S. housing sales, plunged 18.9% on a year-on-year basis in June.
Though data ranging from building permits to homebuilder sentiment suggest the housing market has bottomed out after being pushed into recession by the Federal Reserve’s aggressive interest rate hikes, the persistent shortage of homes for sale could limit any rebound.
With the average rate on the popular 30-year fixed mortgage just under 7%, according to data from mortgage finance agency Freddie Mac, many homeowners are remaining in their homes for longer, contributing to the tight supply.
Though builders are ramping up production, they are being hampered by shortages of materials like electrical transformer equipment. Higher borrowing costs and land shortages are also constraints.
There were 1.08 million previously owned homes on the market last month, down 13.6% from a year ago. At June’s sales pace, it would take 3.1 months to exhaust the current inventory of existing homes, up from 2.9 months a year ago.
A four-to-seven-month supply is viewed as a healthy balance between supply and demand. The median existing house price fell 0.9% from a year earlier to $410,200, the second-highest price ever. The median house price rose 3.5% from May.
“Limited supply is still leading to multiple-offer situations, with one-third of homes getting sold above the list price in the latest month,” said Lawrence Yun, the NAR’s chief economist.
Properties typically remained on the market for 18 days in June, up from 14 days a year ago. Seventy-six percent of homes sold in June were on the market for less than a month. First-time buyers accounted for 27% of sales, down from 30% a year ago.
All-cash sales accounted for 26% of transactions compared to 25% a year ago. Distressed sales, including foreclosures, represented 2% of transactions, which was unchanged from May.
Reporting by Lucia Mutikani; Editing by Paul Simao
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON, June 27 (Reuters) – Sales of new U.S. single-family homes surged to the highest level in nearly 1-1/2 years in May, benefiting from a dearth of previously owned homes available for sale.
New home sales jumped 12.2% to a seasonally adjusted annual rate of 763,000 units last month, the highest level since February 2022, the Commerce Department said on Tuesday.
Separately, the U.S. Treasury Department released a new analysis showing that real construction spending on new manufacturing facilities has doubled so far this year compared to the 2005-2022 average, driven largely by infrastructure, semiconductor and clean energy subsidies and tax incentives.
Real spending on computer, electronics and electrical manufacturing facilities nearly quadrupled over the same period, the Treasury said.
April’s home sales pace was revised down to 680,000 units from the previously reported 683,000. Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, slipping to a rate of 675,000 units.
Sales shot up 20.0% on a year-on-year basis in May. New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis.
The housing market has likely found a floor and could be even improving. Data last week showed homebuilder confidence rising into positive territory in June for the first time in 11 months. Housing starts surged in May as supply remains tight, while home resales edged up.
Economists say the signs of revival in the housing market suggested the Federal Reserve would need to keep raising interest rates. The housing market has been the biggest causality of the U.S. central bank’s fastest rate hiking cycle since the 1980s. The Fed, which has raised its policy rate by 500 basis points since March 2022, has signaled two more rate increases this year to cool demand in the overall economy.
The increase in sales last month was despite mortgage rates resuming their upward trend. The average rate on the popular 30-year fixed mortgage was higher in May relative to April, rising to 6.57% by the last week of the month, according to data from mortgage finance agency Freddie Mac.
New home sales posted double-digit growth in the Northeast, South and West. They rose 4.1% in the Midwest.
The median new house price in May was $416,300, a 7.6% drop from a year ago. There were 428,000 new homes on the market at the end of last month, down from 432,000 in April. At May’s sales pace it would take 6.7 months to clear the supply of houses on the market, down from 7.6 months in April.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Aurora Ellis
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[1/4] Pedestrians walk in front of a crane and scaffolding on a construction site in central Sydney, Australia, May 31, 2018. REUTERS/David Gray
SYDNEY, June 1 (Reuters) – Australian business investment rose to a seven-year high in the first quarter, helped by a jump in spending on mining, manufacturing and transport, while firms affirmed plans for solid spending in the year ahead.
Data from the Australian Bureau of Statistics on Thursday showed private capital spending climbed a real 2.4% in the first quarter from the previous quarter, compared with forecasts ranging from a rise of 1% to 1.9% from big Australian banks.
The A$36.1 billion ($24.5 billion) invested was the highest level since 2015’s December quarter.
Firms also boosted their combined spending plans for the year to June 2024 to A$137.6 billion, up 6.4% from an earlier estimate.
“Business investment may yet prove to be a bright spot in what looks set to be a gloomy Q1 GDP print,” said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.
“Although expectations for growth have generally weakened over the past three months, firms’ expectations for capex spending in FY24 remain healthy. However, this may be an acceptance of higher cost inflation, rather than an intention to make larger additions to the capital stock.”
First-quarter investment by Australia’s huge mining sector climbed 1.7%, accelerating from a rise of 0.7% in the previous quarter. Spending on new equipment and machinery rose 3.7%, marking the largest quarterly growth in two years.
The capital spending figures will feed into data on gross domestic product (GDP) due next week. Growth is expected to slow due to slowing consumer spending and high levels of imports.
Construction work done came in better-than-expected, although residential building remained soft, likely making a flat contribution to Q1 GDP growth.
The Reserve Bank of Australia (RBA) has hiked rates by a wallet-busting 375 basis points since May and is warning that more increases may be required to get a grip on inflation.
Markets wager the current cash rate of 3.85% is certain to reach 4.1% by August and there is a higher risk that the RBA could surprise with a quarter-point hike as soon as next week, after a hot inflation report for April.
($1 = 1.4743 Australian dollars)
Reporting by Stella Qiu; Editing by Jacqueline Wong and Edwina Gibbs
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WASHINGTON, May 23 (Reuters) – Sales of new U.S. single-family homes jumped to a 13-month high in April, boosted by a persistent shortage of previously owned houses on the market and a sharp decline in prices from last year’s lofty levels.
The report from the Commerce Department on Tuesday followed on the heels of data last week showing a surge in permits for future single-family housing construction. With confidence among homebuilders rising to a 10-month high in May, there are no signs yet that a recent tightening in credit conditions are weighing on the housing market, the sector hardest hit by the Federal Reserve’s fastest interest rate hiking cycle since the 1980s.
“The evidence continues to accumulate that the housing market may have largely adjusted to the higher level of mortgage rates but the decline in the median home price is consistent with the hypothesis that home builders may be tailoring the construction of new homes towards first-time buyers,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
New home sales increased 4.1% to a seasonally adjusted annual rate of 683,000 units last month, the highest level since March 2022. March’s sales pace was revised lower to 656,000 units from the previously reported 683,000.
The government revised the sales, inventory and months’ supply data going back to January 2018.
New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis.
Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, would fall to a rate of 665,000 units. Sales rebounded 11.8% on a year-on-year basis in April. The median new house price in April was $420,800, an 8.2% drop from a year ago. Home sales last month were concentrated in the $300,000 to 499,000 price range.
The inventory of existing homes remains 44% below its pre-pandemic levels, according to data from the National Association of Realtors, which also last week reported price rises in roughly half of the country, multiple offers and many homes being sold above list price.
The shortage is pushing buyers keen to take advantage of dips in mortgage rates, keeping builders busy even as the overall housing market remains depressed.
The government reported last week that single-family building permits increased to a seven-month high in April.
The average rate on the popular 30-year fixed mortgage has been hovering in the middle of its 6.09% to 6.73% range this year, after peaking at 7.03% in late 2022, according to data from mortgage finance agency Freddie Mac.
New home sales increased last month in the Midwest and South regions, but dropped in the Northeast and West.
There were 433,000 new homes on the market at the end of last month, up from 432,000 in March. At April’s sales pace it would take 7.6 months to clear the supply of houses on the market, down from 7.9 months in March.
U.S. stocks were trading lower. The dollar rose against a basket of currencies. U.S. Treasury prices fell.
SPRING REVIVAL
The report added to labor market resilience, strong retail sales as well as a rebound in production at factories in suggesting that the economy regained momentum early in the second quarter.
That view was underscored by a survey from S&P Global on Tuesday showing its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, climbed to a reading of 54.5 this month. That was the highest level since April 2022 and followed a final reading of 53.4 in April.
It was the fourth straight month that the PMI remained above 50, indicating growth in the private sector.
Following last week’s upbeat reports, the Atlanta Federal Reserve raised its second-quarter gross domestic product growth estimate to a 2.9% annualized rate from a 2.6% pace. The economy grew at a 1.1% rate in the first quarter.
Most economists expect a recession in the second half of this year, citing the 500 basis points worth of interest rate increases from the Fed since March 2022. Tightening credit conditions and a stand-off over raising the federal government’s borrowing cap have also raised the risks of a downturn.
The survey’s measure of new orders received by private businesses jumped to 54.3 this month, the highest reading since last May, from 51.9 in April. The services sector drove the increase, keeping services inflation elevated. A measure of prices paid by factories for inputs fell below 50 for the first time in three years. The survey’s gauge of prices paid by businesses for inputs slipped to 58.5 from 61.2 in April.
Businesses also increased headcount, with companies reporting that vacancies were being more easily filled.
Reporting by Lucia Mutikani; Editing by Paul Simao
Our Standards: The Thomson Reuters Trust Principles.
LONDON, April 27 (Reuters) – European commercial real estate investment fell to its lowest in 11 years in the first quarter of 2023, MSCI Real Assets said on Thursday, as investors spooked by higher interest rates and the economic outlook put acquisition plans on ice.
The number of offices sold – Europe’s largest real estate sector – fell to its lowest on record, while the volume of transactions slumped to a 13-year low of 10.8 billion euros ($11.94 billion).
The UK kept its top spot as Europe’s largest commercial real estate market, but Paris overtook London to become the region’s most active investment destination, with the three largest European property deals of the first quarter all taking place in the French capital.
Commercial real estate has become a focus for fresh concerns about financial stability, after sharp interest hikes, recession fears and declines in office occupancy and retail footfall following the COVID-19 pandemic heaped pressure on values.
A recent JP Morgan investor survey cited commercial real estate as the most likely cause of the next financial crisis.
Some of the largest banks in the United States have singled out commercial real estate as an area of concern while European banks have less direct exposure to the sector, according to International Monetary Fund estimates.
“While there are obvious concerns about the availability of real estate finance following the banking turmoil in March, we’ve yet to see a widespread increase in distressed sales,” said Tom Leahy, head of EMEA real assets research at MSCI.
Giant asset manager Blackstone (BX.N) saw its first quarter earnings plunge as the commercial real estate slowdown stymied some asset sales. Blackstone has limited withdrawals from its real estate income trust after a surge in redemption requests.
($1 = 0.9048 euros)
Reporting by Elizabeth Howcroft, editing by Sinead Cruise
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