A majority of US real estate executives have warned there is little prospect of asset values increasing in the next 12 months, with a third of senior professionals believing prices could be somewhat lower next year.
Overall, 71 percent of senior professionals questioned for the latest sentiment survey by the US Real Estate Roundtable, said they believed asset values would be about the same, or somewhat lower, in 12 months time compared to today.
The figure is an improvement from just three months ago, when 73 percent said the same thing – and a further 9 percent warned valuations would be much lower. In its fourth quarter survey, the US industry lobby group found that no senior professionals expected valuations to be ‘much worse’ in 12 months time, but admitted there was a ”grim sense of reality setting in”.
The survey’s sentiment index recorded scores of 56, 63 and 70 in terms of measuring confidence about current conditions, overall conditions and future conditions respectively. The ideal is 100, which indicates the industry is improving year-on-year.
Real estate roundtable president and chief executive Jeffrey DeBoer said the uncertainty and paralysis of the last year had given way to a greater sense of acceptance of market realities. “But that's a long way from saying markets are stabilising or that conditions are on the mend.
“With job losses mounting, consumer confidence in the doldrums, and a relapse of the recession still possible, additional policy action is needed to restore credit availability – the lubricant of the economy and job creation – and to address the equity shortage resulting from falling commercial property values,” DeBoer added.
The survey, released this week, questioned more than 100 senior executives on issues such as valuations, perspectives and the availability of capital.
On the debt side, 85 percent of people said they expected credit availability to be “about the same” or “somewhat better” in 12 months’ time, compared to 88 percent three months ago. However, in July, almost no-one thought the debt situation would be “much better” in one years’ time. The latest survey though found 10 percent of executives felt things would be significantly improved in October 2010.
The survey also recorded a selection of quotes from respondents. Here are a sample:
“The market’s not getting worse anymore… I think we’re going through a bottoming process.”
“Things will be a little bit better in a year’s time. It’s going to be tough for many to weather the next 12 months, but for others, that means opportunities.”
“Things are dysfunctional, just as much now as last year. Some would call the system ‘constipated.’”
“It may be painstakingly slow, but we are moving in the right direction.”
“We’re just entering the 1st phase of the cycle, fundamentals are worsening, rates are falling.”
“We should be down 3 percent to 40 percent from peak to trough [in hospitality]. I think we’re at about 30 percent to 35 percent right now, so there’s a little room for further decline, but by a year from now, hopefully that will change.”
“5 percent to 10 percent equity doesn’t work anymore, you need 40 percent to 50 percent now.”
“Some lenders are coming out—like the LifeCos—but it’s not enough to meet the need.”