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The series of quick-fire rate hikes initiated by the US Federal Reserve in mid-2022 has marked an end to the era of low- interest-rate investing in place since the global financial crisis in 2008. Higher interest rates are simply a reversion to the mean, returning the cost of capital to historical norms. At the same time, however, in a market habituated to abundant supplies of cheap debt, rising rates represent a sea change in how investors underwrite deals. These impacts have been felt across the real estate sector in several ways:
- Higher interest rates lead to asset revaluations.
- Many investors have moved to the sidelines.
- Traditional asset classes lose their shine.
- Investors are pivoting to alternative assets.
- Transition risk comes to the fore.
This forecast will give readers a heads-up on where to invest, which sectors and markets offer the best prospects, and trends in the capital markets that will affect real estate.
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