A Global Ripple Effect of China’s Real Estate Crisis Begins to Surface

Hard numbers will start to become available and provide some indication of just how much trouble the wider real estate industry is in as Chinese investors and their creditors put real estate holdings across the globe up for sale. The “need to raise cash amid a deepening [national] property crisis” has taken priority over the “risks of offloading real estate assets into a falling market.” “A worldwide slump triggered by borrowing-cost hikes has already wiped more than $1 trillion off office property values alone,” however due to a lack of real estate sales, appraisers have little recent data to go on to determine a true picture of the total damage. So far, initial sale activity by Chinese investors has been of Europe-owned assets, but sales are picking-up outside of Europe too. Concerns have heightened among regulators and the market of potential concealed large, unrealized losses that could spell trouble for both banks and asset owners. The influx of motivated sellers is anticipated to provide more clarity on capitalization rates with every sale transaction, but “as a consequence, landlords may have to inject more money to cure any loan-to-value breaches or risk having the properties seized by lenders.” However, since the sellers are ‘motivated,’ it is debatable whether valuers will take such disposals fully into account.

Source:    https://www.crainsnewyork.com/real-estate/chinas-real-estate-crisis-starting-ripple-across-world