The world's largest alternative asset management company, Blackstone Inc. (NYSE: BX), believes that people should rekindle their love for real estate.
On November 19th, Jon Gray, President and Chief Operating Officer of Blackstone Group, stated at the 2024 International Financial Leaders Investment Summit that there should be a renewed passion for real estate.
In January, we publicly stated that we believed the real estate market was not suitable for investment, but in the past 12 months, we have invested $30 billion in this field, which shows our great determination. Jon Gray said that the fundamentals of the real estate market are good, including most categories, whether it is logistics real estate or leasing real estate. Blackstone Group's investment focus is on areas with vacancy rates around 5%, although the growth rate of cash flow has slowed down during the current difficult period, it still maintains growth.
Jon Gray believes that the office industry in the post pandemic era faces many challenges, but other parts of the commercial real estate market are generally performing well. The impact on the market is the sharp rise in capital costs, the increase in base interest rates, the widening of interest spreads, and the rise in non leveraged real estate yields, which have led to a decline in their value. If we look back about a year ago, the negative sentiment in the real estate market reached its peak, and since then we have seen that total borrowing costs may have decreased by 35% or even more. We have seen the redevelopment of the commercial mortgage supported securities market, which has grown fourfold compared to a year ago, and trading activity is also increasing. In the long run, real estate transactions involve supply and demand relationships, and we can see that new construction projects such as warehouses are decreasing, and the new construction rate has decreased to 80%, laying the foundation for the ultimate recovery
Moody's, one of the three major international rating agencies, believes in a recent report that China's recent stimulus measures may narrow the decline in national contract sales in the coming months. However, it is unclear whether these measures can prevent a decline in sales due to continued market challenges, as homebuyers remain cautious.
Moody's Ratings Assistant Vice President Zhou Yiwei said, "We expect the continued decline in contract sales across China to narrow in the next 12-18 months, as policy stimulus measures mainly support sales by improving buyer confidence, enhancing affordability, and increasing additional demand. The improvement in buyer confidence may also provide moderate support for sales prices. However, it is currently uncertain whether the new measures will be sufficient to prevent a decline in contract sales. Due to lower housing prices and more advantageous locations, competition from the second-hand housing market is becoming increasingly fierce. However, if the government further increases support, sales may exceed our expectations
Zhou Yiwei believes that the sales performance between various tier cities and real estate developers will continue to diverge. High energy cities will continue to perform better than low energy cities, thanks to their stronger economic strength, population inflows, and policy stimulus measures. Similarly, state-owned developers will perform better than their private counterparts due to their stronger reputation, higher exposure to high-energy cities, and smoother financing channels.
Another international rating agency, Fitch Ratings, believes that the sentiment of Chinese homebuyers has improved following the recent policy release. Fitch believes that if housing prices do not show a comprehensive recovery, homebuyers' purchasing decisions will focus on economic fundamentals.
Fitch stated in the report that the large backlog of inventory is one of the reasons for the uncertainty of the real estate market recovery. Fitch believes that measures to assist local governments in acquiring unsold commercial housing that has already been built will have an increasing positive effect, but the process may be gradual. Although the aforementioned policies have reduced the financing costs for local governments, the scale of these funds is still small compared to the surplus supply side.
In addition, Fitch believes that the expansion of the "whitelist" program will support real estate companies in delivering properties to homebuyers and improve market sentiment. According to the plan, local governments can recommend projects to banks to accelerate loan processing. However, Fitch believes that administrative procedures may take time and the impact on sales will be limited and gradual.