Publications

- March 1, 2021: Vol. 15, Number 3

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Debt appeal: The continued rise of non-bank real estate lenders

by Peter Hayes

Downturns all have different causes and effects, so the range of experiences for the real estate market is wide. They can range from mild declines affecting a narrow part of the market — such as the region-specific Asia crisis or the dotcom bubble, which affected mainly tech-related office tenants — all the way to a full-blown, synchronised global downswing, such as the global financial crisis (GFC) in 2008.

The average peak-to-trough decline of real capital values in a downturn is 12 percent, but the better-performing sectors and regions typically report declines of 5 percent or less, and in the worst-hit parts of the market, a correction is often more like 30 percent to 40 percent.

Clearly, the downturn caused by the pandemic is still at a relatively early stage, as values peaked in the first quarter of 2020. Unlike the GFC, global policymaking has been highly coordinated and sizable. There is also a notable absence of system-wide excesses of finance, leverage, o

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