The Biggest Sign That Property Is Rebounding (And It’s Not Sales)…
- Jun 16, 2008
Forget real estate sales. There’s a bigger indication that the market may be turning around: Real estate investment.
Home prices may be down, but the average real estate fund is 2 percent higher this year compared to 2007, according to the Chicago Tribune.
That’s a decent amount, given New York-based financial analyst Lipper Inc. also says that the average U.S. diversified stock fund is down 8 percent this year.
The rise in real estate-related stocks is good news–and offers hope as the housing slump rages on.
- Shares of self-storage and apartment management companies have risen as investors are again beginning to see real estate as a great investment.
- Although real estate funds decreased 14 percent in the past 12 months because of concern about value declines and the credit crisis, the Trib says, their annualized returns aren’t terrible: The funds’ three-year annualized return is 6 percent. The five-year annualized return is 14 percent.
And another bit of good news: Real estate investment fever isn’t just happening in the U.S. According to the Financial Times, nearly $20 billion in real estate funds are scheduled to be launched this week for development in Asia and Europe.
Property fund management firm MGPA raised enough for a $3.9 billion fund to invest in Asia and a $1.3 billion fund to invest in property in Europe, which will be spent on renovating buildings and buying devalued assets. The European fund currently has a site planned for development in Greece and previously bought residential assets in Poland, according to Reuters.
London-headquartered property fund manager Europa Capital also raised money for two funds to invest in European property.
Getting equity isn’t hard to do overseas (at least, not yet), which–when you also consider that the funds are focusing on buying distressed or devalued residential and commercial properties, many in developing markets–could be a sign that investors feel real estate’s long-term opportunities are very positive, the Times said.
And that’s a good sign–in the U.S., Europe and everywhere else the funds are investing in.
We all know the housing market’s turnaround won’t be instantaneous–and it won’t be easy. The general point when that correction will begin has been under debate for a year–late fall? Early 2009? Or beyond? No one is sure.
And as more downbeat housing news floods in–such as RealtyTrac announcing foreclosure filings were up in May late last week–we’re more unsure by the minute.
Forget declaring each slightly positive nugget in the latest housing reports as a sign: The best indication that faith in the housing market is getting stronger is the market’s reaction to the industry.
If investors are banking on property regaining strength in the next year–and, based on the recent investments we just discussed, it seems they are–things may not be as bad as they seem.
Or–at least–they may not be bad for long.