High net worth investors have some serious long-term concerns about the real estate market. A new survey from CTBC Bank showed that high net worth investors are particularly concerned about rising interest rates and affordability issues. Of those surveyed, 75% were concerned about the negative impact of housing affordability and 60% showed concern about rising interest rates. Generational gaps in housing needs also topped the list, with 60% of respondents concerned. Overall, however, the respondents were refreshingly optimistic about the economic outlook with only 15% expressing less comfort making an investment decision today than they did five years ago. The survey also showed that 82% of investors interviewed felt comfortable making investment decisions in the current economic climate. To find out more about the survey results and what they say about the real estate investment environment ahead, we sat down with Noor Menai, President & CEO of CTBC Bank USA, for an interview.

GlobeSt.com: How did the results of the survey align with your expectations?

Noor Menai: Going in, we had two presumptions. One, we were watching the data—and the data seemed to support the results—that there is no let up in demand and the economy is chugging along. We were also being programmed by the commentary around us that the business cycle has a way of catching up, and we were going to be in [a recession] soon. From that aspect, the survey confirmed the data, which is always gratifying. The data never lies. Sentiment sometimes plays a part, but it has to be at a much larger scale for sentiment to affect the market. These are relatively well-informed investors, and they have multiple sources. Investors, especially overseas investors, don't rely on one source but on talking to trusted advisors, being in the neighborhood and being voracious consumers of information around absorption rates, latency of how long things are sitting on the market and supply. The common denominator here is smart intelligent investors.

GlobeSt.com: The investors in the survey had a very optimistic economic outlook, but that didn't seem to translate to real estate investment. Why?

Menai: These investors understand that real estate as an asset class doesn't exist in isolation. Its value is defined by how the economy is doing and the health going forward. We look at what investors are worrying about, and that has been a consistent theme for us. Investors talk about education, the next crop of buyers and they worry about affordability. They are smart enough to know that if you don't take care of the demographics of the country, and you don't train the next class of upper class and upper middle class people, then eventually the bottom falls out of the asset classes that have a value that is defined by the purchasing power of those very same people. This is the same worry out of the UK, Hong Kong, Bejing. These are smart investors that know no capital. This is international money thinking smart, and understanding that if they want to be long-term investors, they may find that 10-years from now a $2 million house isn't worth $2 million because no one can afford it.

GlobeSt.com: Real estate has been a preferred asset class this cycle. Do you see that changing?

Menai: No, this is where we see the demand maintaining itself. These are medium to long-term worries around the sustainability of the market. As far as we can see from speaking to our investors, currently, there is a confidence that this is a sustainable asset class.

GlobeSt.com: Housing was overwhelmingly the favored asset class. Why does housing continue to be so popular?

Menai: If you look at the favorite places for investment from the Pacific Rim, L.A. is the number one, San Francisco is right up there and then New York, Seattle and Houston, Texas. I think that shows investor's faith in the underlying strength of these economies. As long as there are jobs being created and the fundamentals are strong, people will need housing. Plus, there is net immigration.

GlobeSt.com: How did the results of the survey align with your expectations?

GlobeSt.com: The investors in the survey had a very optimistic economic outlook, but that didn't seem to translate to real estate investment. Why?

GlobeSt.com: Real estate has been a preferred asset class this cycle. Do you see that changing?

GlobeSt.com: Housing was overwhelmingly the favored asset class. Why does housing continue to be so popular?

Instant Insights /

High Net Worth Investors Have Some Concerns About CRE

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