A lot has been happening in the news lately, with Britain’s decision to leave the European Union on June 23rd. How does this affect real estate, and what other stories out there should investors know about? Let’s take a look.
Brexit Could Be Good for U.S. Real Estate
A referendum was held on Thursday, and with more than 30 million casting their votes, the UK has decided to separate from the EU. This decision will affect not only the citizens of Britain and those living there on visas, but also economies worldwide. (If you don’t know about the so-called “Brexit” yet, check out this rundown.)
How will this affect real estate?
- Seen as a generally safe investment, REITs are expected to hold their own even as the stock market becomes volatile. Said Alexander Goldfarb, senior REIT analyst at Sandler O’Neill, “Anything that is going to drive the 10 year lower is a positive for REITs. Three-and-a-half percent dividend yield with 6 to 7 percent earnings growth is pretty darned attractive in this environment.”
- Commercial real estate is expected to climb in value. Foreign investors, especially from China and the Middle East, had been buying up U.S. real estate at high rates. Brexit will continue to accelerate that, say analysts.
- Foreign buyers are expected to capitalize off of Britain’s depreciating sterling. “This will now create a short-term buying opportunity for U.S. dollar- and euro- based property investors,” said Peter Wetherell, chief executive of Wetherell, a Mayfair-based broker. “For overseas buyers, this big and dramatic drop in the value of sterling will effectively offset the Stamp Duty and tax adjustments and it will make prime London property a lucrative investment for overseas investors bold enough to take a punt despite the market uncertainty.”
- Domestic buyers in London will likely face unfavorable conditions due to increased competition and an uncertain economy.
U.S. Mortgage Rates Remain at Almost 3-Year Low
U.S. fixed mortgage rates remain largely unchanged — at a near 3-year low.
Sean Becketti, chief economist of Freddie Mac stated, “Mortgage rates have been slow to adjust to the 10-year Treasury yield, which has increased 12 basis points since last week. This week’s survey shows the 30-year fixed rate inching up to 3.56 percent, only 2 basis points above last week’s average. The low rates continue to be good news for the housing market, as existing home sales rose 1.8 percent to a 5.53 million seasonally adjusted annual rate in the month of May — the highest level since February 2007.”
New Startup Attempts to Provide Better Access to Big Commercial Deals
Meanwhile, in the tech world, 28-year-old Blackstone and Harvard alum Ryan Williams is attempting to change the way commercial real estate is bought and sold. Assembling a team of employees from Square, Google, and Facebook, his company Cadre has already raised nearly $68 million.
According to Tech Insider, “Cadre is a platform where approved sellers (“operators”) can apply to post carefully vetted commercial real estate deals, from stores to apartment buildings to offices. A network of high-wealth individuals or ‘qualified purchasers’ who want to make real estate investments — but haven’t previously had access to deals — can drop $500,000 or more on individual properties. Currently, all of Cadre’s listed properties are located in the US, but the startup plans to expand internationally.”
Listing Fees for Homeowners Posting to MLS Eliminated by New Site
USRealty.com, headed by former owner of one of the most popular FSBO sites Colby Sambrotto, has eliminated both upfront and closing fees for homeowners selling on his site. How does the site make money? The free version of the site simply offers a simple placement of listings on the MLS; anything beyond that (including adding additional photos, editing a listing, or cancelling a listing) is “upsold” to customers.
Said Sombrotto, “We’re turning the MLS into a ‘freemium’ model on the internet.”
Investors: How do you think Brexit will affect worldwide real estate markets? Anything else you’ve seen in the news lately you’d like to discuss?
Let’s chat in the comments section!