20230904-0908 Newsletter

Macro & Business Matters?in?Global

European private loan market falters as corporate credit stress mounts

Fundraising and deal-making have dropped sharply at European private debt funds, new data shows.

The European private credit industry, which flourished after the 2008 financial crisis as capital-constrained banks cut lending, has raised 26.1 billion euros ($28.02 billion) of new investment so far in 2023, according to data provider Preqin.

That represents a 34% drop on the same period last year and follows a record 2022 for capital raised by the sector.

Private lending is declining as euro zone banks cut?loan creation?and business activity?falters.

The M3 broad measure of euro zone money supply declined in July for the first time since 2010. The Bank of England is?concerned?about a funding squeeze in non-bank lending.

Private lending is declining as euro zone banks cut?loan creation?and business activity?falters.

The M3 broad measure of euro zone money supply declined in July for the first time since 2010. The Bank of England is?concerned?about a funding squeeze in non-bank lending.

Rising debt cost to weigh on euro zone GDP, HSBC says

The growth in euro zone's gross domestic product (GDP) may come under pressure as corporates ease the pace of investments due to higher borrowing costs, HSBC economists said on Tuesday.

The global bank expects rising interest rates to shave off more than 1% of euro zone's GDP by 2025.

A recession in Europe is "certainly possible," HSBC said. However, the corporate sector will not tip the euro zone economy into one, as "fairly healthy" balance sheets limit the risk of businesses going bust, it added.

"The impact has been delayed because, while debt costs are rising, firms are also earning more interest on their deposits which ballooned as a result of subsidies during the COVID-19 pandemic," said Chris Hare, the lead senior economist at HSBC.

U.S. Mortgage Applications Dip in Late August

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.9 percent on a seasonally adjusted basis from one week earlier.?On an unadjusted basis, the Index decreased 5 percent compared with the previous week.?

"Mortgage applications declined to the lowest level since December 1996, despite a drop in mortgage rates.?Both purchase and refinance applications fell, with the purchase index hitting a 28-year low, as prospective buyers remain on the sidelines due to low housing inventory and elevated mortgage rates," said Joel Kan, MBA's Vice President and Deputy Chief Economist.?

"The 30-year fixed mortgage rate decreased to 7.21%?last week, but rates remained more than a full percentage point higher than a year ago, despite mixed data on the health of the economy and signs of a cooling job market.?The refinance index dropped to its lowest level since January 2023, driven by a 6 percent decline in conventional refinances."?

SOURECE: REUTERS,?Daily News, Daily Sanah

CRE & Tourism in?Global

Record Breaking Real Estate Assets

Real estate has once again become the main investment destination for the Portuguese in 2022. Banco de Portugal (BdP) accounts reveal that this year families concentrated 498 billion euros in real estate assets (namely in housing). This makes it the first time in 13 years that real estate assets weighed more heavily on family wealth than financial assets.

According to a report by?idealista, with regard to private wealth, a trend has been observed over the last seven years: the value of real estate assets has grown at a faster rate than the capital invested in financial assets (such as deposits). And there is a simple explanation: the transfer of wealth to housing was driven by the low-interest rates observed until July 2022, along with high house prices.

It turns out that the amount invested by families in real estate assets rose so much that in 2022 it surpassed financial assets for the first time in 13 years. According to the BdP, families owned 498 billion euros in real estate last year, compared to 480 billion euros invested in financial assets. The appreciation of real estate assets compared to 2010 is 35%, above the 30% that increased the value of financial assets.

Costa Navarino: Next Investments Focused on Alternative Tourism, Themed Hotels

After completing investments this year of 850 million euros at?Costa Navarino,?Messinia, which saw the opening of?the first Mandarin Oriental hotel in Greece?and of the?Navarino Agora marketplace, Greek developer?TEMES?said its next step will focus on boosting alternative forms of tourism.

TEMES’ next phase of investments follows the expansion of its portfolio of?private residences?that are available for sale. The portfolio?Costa Navarino Residences, which comprises of four neighborhoods –?Sea Dunes, Olive Grove, Rolling Greens?and?Valley Greens?– offer “custom” and “turn-key” villas.

SOURECE: Google News, GTP, Greek City Times, PORTUGAL NEWS, Daily News, Daily Sabah

Market Performance & Institution Views

Global Residential Rents Surge 300 Percent Their Prepandemic Growth Rates in 2023

Based on the 10 cities covered by Knight Frank's Prime Global Rental Index, global rental values rise 7.5% in the year to June. While this rate was down from the 8.2% seen in Q1, and lower still than the 12.2% growth reached in the first quarter of 2022 - which marked the peak of the post-pandemic rental boom, current growth remains well above trend.

The recovery in rents in the past two years has been remarkable. The overall index has risen 23% from Q1 2021 to date. Growth in specific cities has been even stronger - with New York, Singapore and London seeing rental growth of 56%, 53% and 51% respectively over the same period.

"Housing rents have risen by more than 50% in key global cities in just two years and are continuing to rise at three times their prepandemic rate. Affordability of housing is set to become the leading political issue within the next 12 months. The need for honest conversations about real supply-side solutions is becoming critical," says Liam Bailey, Knight Frank's global head of research.

Key drivers for rental growth are led by strong demand as residents return to cities following lockdowns, the affordability squeeze as prospective buyers are priced out of sales markets following rate hikes, and weak new supply following construction disruption through the pandemic.

While the rate of growth in many cities will undoubtedly slow - lack of progress on new delivery means that tenants will face high rents for the foreseeable future, says Knight Frank.

SOURECE: HNR, CRE HERALD,?Property?Journal