Int’l realtor anticipates investment clarity in 2H24

Simon Smith

Investment forecasts will be “a game of two-halves” this year, with the second half of the year to bring greater clarity. Speaking at the sidelines of a British Chamber of Commerce in Macao lunch event yesterday, Simon Smith, senior director at the international real estate firm, Savills, expects the first half of the year to have a slow recovery if any due to prolonged uncertainties in the market.

In particular, he noted during his presentation that the first half of the year features a number of elections in Asia and the Pacific. The period before any election is rife with uncertainty, but these will settle once post-election results are known.

Smith believes that the outlook will become clearer in the second half of the year. “I think there will be more certainty around inflation, economic growth and interest rate, and that will reassure investors that now is the time to reinvest into these markets,” Smith said.

He attributes his confidence in the projected stabilization and decline in interest rates to several factors that had driven up figures to begin with.

“The supply chain disruptions caused by the emergence of Covid-19 are beginning abate,” he said. “Inflation is partly a base game. So if you have a high base for comparison from last year, things will almost inevitably come down. It is mathematical. Inflation will begin to come down as the post-Covid supply disruption is dissipating.”

Nonetheless, he noted that the market is concerned with supply disruptions in the Middle East, caused by geopolitical tensions and other wars. Notwithstanding this, he noted that all things being equal, inflation was likely to fall on a global scale in 2024.

He underlined that decisions to increase interest rates as part of efforts to mitigate inflation were made at the cost of economic growth. With high interest rates, small property owners encounter difficulties in repaying mortgages, while larger investors consider deferring investment plans due to the high cost of capitalization.

That being said, he observed that the US economy has held up well in recent times. However, the European market has shrunk slightly. As such, unseen factors may underlie the global expectation that interest rates will fall soon. A positive sign, however, is that the US has managed its inflation somewhat.

In spite of his confidence, he added that it can be difficult to predict the market because it is always “flip-flopping.” He expects the US Federal Reserve could delay lowering interest rates, but eventually it would take the necessary step.

Overall, he predicted that this year would be a positive year for real property investments.