Real estate

Housing crisis could be a boon for funds and asset managers

Posted by MoneyController on 03.07.2023

The uncertain situation in the real estate market opens up a scenario that is certainly fraught with risks, but perhaps also with opportunities for real estate funds and asset management companies.

Property market corrections

Rising interest rates have concrete consequences for the property market: mortgage costs rise and buying a property becomes more expensive. This situation leads to a fall in demand for houses and therefore a fall in their price. This situation is more pronounced where market prices are more overheated. The situation may therefore differ from country to country. For example, the crisis is particularly pronounced in Sweden, but it is also noticeable in a country such as Germany, where the housing market has grown with some continuity in recent years.

More expensive mortgages discourage new home purchases

As Claudio Kummerfeld writes in the Financial World portal, one question is whether this situation can be interpreted as a crisis in the housing market or as a buying opportunity. From the buyer's point of view, as mentioned above, buying a house can be particularly expensive: the cost of financing may not be compensated by the lower price of the property.

Interest in property as an alternative investment

Kummerfeld points out that there are opportunities for large asset management companies or property funds in particular to consider adding more affordable property to their portfolios. As Oliver Bäte, CEO of Allianz, told Bloomberg, the downward correction in property prices is an opportunity to diversify his company's portfolio. Buying real estate is part of a diversification strategy that focuses on assets that can be included in alternative investments.

The property market is diverse and complex

The property market is diverse not only in terms of geographical diversification, but also in terms of the type of property: for example, a fundamental distinction is made between residential and commercial property. At least two aspects emerge from Kummerfeld's article and Bäte's interview: 1) the need for asset managers to select the most promising properties in terms of price, 2) the uncertainty created by the outlook for monetary policy and rising interest rates (the cycle of which is far from over in Europe, for example).

Read also:

What is a real estate fund?

European real estate risks crisis, but there are still opportunities for investors

Interest rates put pressure on the housing market

Interest rates dampen demand for mortgages and now inflation could hit real estate too

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