A large Chinese property developer has shaken global markets, and market strategists say it could send ripples across the global economy. The share of the company plummeted substantially as the company’s liability totals to $305 billion dollars. On Tuesday the company’s spoke person announced that Evergrande will pay its creditors from its wealth management account by a way of the real estate, but its investors aren’t sure if replacing their liquidity with real estate is a solution that they are willing to accept.
Six months ago, investors panicked when the container ship got stuck in the Suez Canal, clogging global energy markets and international trade. Today, markets are concerned over a potential default by Evergrande, an event that some believe could set off a global financial panic. Investors worry that this could potentially slow down the second biggest economy in the world.
How will this impact our real estate market, particularly the commercial real estate sector? It is our opinion that in a down market where there hasn’t been any volatility for a long time, we can easily attach a cause and effect by any negative headline. Combine this headline with the second phase of the Covid-19 Delta Variant, higher inflation, and Fed’s signaling that they may buy less bonds in the upcoming year one would begin to see why there is a sense of panic in the market. This anxiety may drive some of the market downturns. We believe that the Chinese government will bail out Evergrande Real Estate Group and will prevent the collapse of their markets.
Ultimately, commercial real estate market will continue strong as the demand for housing increases as does other segments of the commercial real estate markets.
Sources, CNBC, FORBES & Walls Street Journal
The opinion is only an opinion of the editor. Please consult with your tax, legal and securities advisor for your investments.
Thank you and working on the future of commercial real estate.