Buyer's market? Outlook 2024

As 2023 draws to a close, the outlook for the property sector appears gloomy to many investment commentators. We acknowledge that there are several factors posing significant challenges to real estate investors, but we also believe that these generate attractive opportunities for the best to generate long-term value.

Some of these factors – such as rising interest rates – are broad macroeconomic trends affecting multiple asset classes, but some are more specific to – and nuanced within – the property market.

Rising interest rates are a clear challenge for almost all asset classes. From a returns perspective, the higher risk-free rate will always make some investors move to less risky assets. Real estate markets are more sensitive to changes in the interest rate than other sectors. The fact that many buyers rely on debt financing is crucial when considering how interest rates affect capital values. As the cost of debt increases, the expected return for final investors also increases, which then pushes prices down. In this environment, being a ‘fully funded’ buyer can be a huge advantage – allowing a longer-term view rather than one driven by the cost of debt.

Read in full: Buyer's market?

The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.