PitchBook – Global Real Estate Report, 1H 2023

The PitchBook Global Real Estate Report for the first half of 2023 highlights the challenges faced by private real estate due to ongoing macroeconomic factors. In the US, interest rates have steadily increased and inflation remains above the Federal Reserve's target. This has resulted in higher debt costs, impacting the achievable returns in real estate, particularly in low-risk and income-focused strategies. Additionally, credit conditions have tightened further, affecting the availability of leverage for real estate investments. However, experts believe that the US is likely to avoid a severe recession, which is a relief for investors. In Asia, the Chinese real estate market is facing troubles. Country Garden, one of China's largest property developers, and Zhongrong International Trust, a shadow-banking entity, have defaulted on interest payments. This is driven by a decline in home sales and cash constraints among Chinese developers, leading to concerns about potential defaults in the property sector. There is also increased scrutiny on China's trust companies, which have significant assets under management. With a large portion of China's household wealth tied to real estate, falling home prices and defaults in influential entities are putting immense pressure on the Chinese market.