Looks like asset investors are going to have to wait a little longer for that opportunity of the century thanks to the coronavirus pandemic. The global outbreak of the virus has significantly slowed down the real estate market and created price gaps for buyers and sellers. These price gaps are quite large, and for now, it seems as if they are set to stay this way.
Buyers and Sellers Want More Discounts in These Transactions
According to Bloomberg, the pandemic has had a drastic impact on potential real estate deals. Sellers are only willing to budge at 5 percent, while buyers are looking for more discounts at 20 percent. This has made it really difficult to make a deal between buyers and sellers. Recently, Preqin, a capital marketing company, announced that worldwide, private equity firms are sitting on $328 billion in stagnant real estate investments. That’s a lot of cash waiting around for real estate.
Bloomberg also quotes Tom Leahy of Real Capital Analytics, saying that “The physical restrictions taking place are mostly preventing new deals from happening…far fewer active buyers, far fewer deals, an increase of deals falling out of contract — those are the preludes to seeing prices fall when the market does come back.”
In April, the whole of Europe saw a steep decline in real estate transactions by nearly 65 percent. The US is expected to see a 35 percent decline, while Asia is expected at 25 percent. Though life is slowly resuming in many parts of Asia, the market is slow to bounce back.
The real estate market may look stark for some, but for Blackstone and Brookfield Asset Management, they are taking the opportunity to invest in distressed assets, which have resulted in the raising of funds at unprecedented rates.