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The US real estate market is set for a downturn after years of strong growth in property values as prospective buyers contend with the effects of inflation, according to an executive at a top real estate investment firm.
Daniel Steinbach, the chief investment officer at global real estate giant Hines, said his firm has observed property sale prices sinking by between 5% and 10% in some areas compared to one year earlier. The trend is impacting the US market as well as Europe.
“I think we’re in for a rough few months,” Steinbach said in an interview with Bloomberg. “This year is going to be choppy water.”
Property values reached record heights in recent years while interest rates remained low and central banks, including the Federal Reserve, maintained lenient financial policy.
But the rise of inflation has added financial pressure for prospective buyers and led central banks to tighten policy, sending interest rates higher and making it more expensive to take on debt.
Inflation has hit four decade highs in recent months.
Steinbach noted that his firm was also seeing sagging demand for rental housing and office space as financial conditions deteriorate.
“Higher inflation is without a doubt making its way into private real estate,” Steinbach added. “The bidding pools are becoming thinner.”
Hines has more than $90 billion in investment assets under management and has a presence in 28 countries, according to its website.
Central banks are tightening financial policies to account for inflation.
Bloomberg via Getty Images
The company did not immediately return a request for further comment.
As The Post reported earlier this month, mortgage demand fell to its lowest level in 22 years for the week ending on June 3 as higher interest rates and limited inventory cooled demand among homebuyers, according to a Mortgage Bankers Association survey.
The average rate of a 30-year fixed rate mortgage was 5.23% in May, up from 3.45% as recently as January, according to Freddie Mac.
The May Consumer Price Index – a key inflation gauge – showed a 5.5% increase in the cost of shelter over the last year. That was the fastest annual pace since February 1991.