Welbaum Guernsey
Bring Clarity to Your LegalProblems. Call Us At:

Interest rates could cause problems for real estate investors

Commercial real estate investors and property owners in Miami, Florida, may be anticipating whether the interest rates will be raised by the Federal Reserve by the end of 2015, which could affect property values. According to the New York Times, this is a possibility thanks to the improved economic growth, although nothing has been decided at this time. While some believe the rate increase would benefit the economy, others claim that financial markets have already been overstimulated by the delay, and a crash is possible.

The Wall Street Journal reports that the impact of low interest rates on commercial real estate are of concern because an increase could negatively affect property values and cause many loan defaults. However, a corresponding rise in inflation and rent increases may counter this effect, and proponents of the hike state that the market has not been destabilized by the overbuilding that led to the bust in 2008.

Property investments for U.S. pension funds are at 7.7 percent of their assets, and investors around the globe have been focusing on commercial real estate during this period of low interest rates. This has led to record high prices that are continuing to rise.

Moody’s Investors Service, which provides research on global capital markets, has warned of the pitfalls of increasingly relaxed lending standards. Already, bank encouragement has led many to invest in real estate, despite the risks. One result of this is the outstanding commercial real estate loans held by banks at the end of the first quarter of this year, which were at $1.7 trillion. These facts indicate that close attention to the future of interest rates is warranted by commercial real estate investors.

No Comments

Leave a comment
Comment Information

2151 S. Le Jeune Road, Suite 200
Coral Gables, FL 33134

Toll Free: 800-509-4946
Fax: 305-441-2255
Map & Directions