Homeowners may be feeling the bite from elevated interest rates, but Carly Tripp says the trend has not yet caused distress in the global private real estate markets she operates in.
“Throughout the rate cycle we’ve seen some of the best financial performance in areas like housing, health care related real estate and in industrials,” Tripp, global CIO and head of investments at Nuveen Real Estate, told BNN Bloomberg in an interview.
“Market fundamentals are really strong.”
Nuveen is an American asset manager with over US$1.1 trillion in assets.
One area where Tripp notes market tightness is in the U.S. office sector – though she notes she “wouldn’t even call it distress yet.”
“Even in the U.S., where office usage is 50 per cent less of what it was pre-pandemic, we are seeing limited amounts of foreclosures,” she said.
The positives Tripp is seeing on the private real estate side contrast with how public real estate markets have been reacting to higher rates.
The S&P 500 Equity Real Estate Investment Trusts Index is down over 11 per cent this year, which marks more than 18 per cent underperformance to the S&P 500.
“While the asset class globally has plunged due to rising rates and inflation, all the things our sister asset classes are dealing with, there have been bright spots,” Tripp said.
MACRO SUPPORTS FOR PRIVATE REAL ESTATE
Tripp is bullish long-term on where the private real estate market is going, noting some macro indicators that could further support the sector.
In Nuveen’s view, “the rate cycle is mostly behind us at this point globally,” according to Tripp.
“It’s getting a little easier to pinpoint what returns should look like, what exit yields should look like and what the cost of debt should look like,” she said.
U.S. RATE PATH
Tripp said she expects U.S. interest rates will be “higher for longer,” as the country’s central bankers have forecasted.
Economists expect the U.S. Federal Reserve will hold rates on Wednesday for the second straight meeting. Market watchers and investors will be listening closely for rhetoric from the central bank indicating how long rates could stay elevated.
INVESTMENT OUTLOOK
On investing, Tripp emphasized the importance of finding areas in the real estate market that have “macro” themes supporting them.
As an example, she pointed to health-care real estate as one likely area of value as the global population ages.
“In 2050, 25 per cent of the global population will be 65 years old, or older. That is very supportive of investing in medical office or senior housing,” Tripp said.
She also highlighted the rental housing market as an opportunity.
“In the U.S., there’s still a shortage of about three million homes, and while we are faced with an increase in supply, we expect that to shake out and equalize around 2025,” she said. “Long-term we still think it’s structurally supportive.”
PUBLIC REAL ESTATE
Though Carly Tripp is a private real estate investor, also shared some insight from her firm about public real estate markets.
“At Nuveen, our view is that the public markets offer a lot value in commercial real estate, particularly if you’re investing alongside an active manager.” Tripp said.
Nuveen is also bullish on office REITs in public markets despite recent stock pressure.
“They’re trading where they were in the early 90s and have great land-value in our opinion,” she said.
COMPETITION IS LIGHT
Tripp said Nuveen is not yet feeling the heat from competition to buy up private real estate.
“Competition is still light, access to debt is still light and liquidity is still really thin in commercial real estate,” Tripp said.
“If you’re a large balance sheet investor and you’re reliant on leverage, this is the time you can really win.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
