Good morning, it's time to start the day by taking a look at the calendar.
22.02.2022 has six twos in it, and that's the most number of twos we are going to see in any date till December 22nd this year.
Aaaand, when we called our favourite numerologist about it, a robot answering machine informed us after a 5 second delay, that when such a date comes:
🔮 Jupiter and Saturn both go rogue, meaning it's an international day off for astrologers.
🔮 If you open your eyes and the see the numbers 22-02-22 by chance, it means money printing angels are assembling around you that this is just another ordinary Tuesday, and reading this newsletter is probably today's only high.
Haha. 😅 🙏 Now to more serious stuff.
Top Trends Playing Out In 2022
In the blink of an eye, two months of the new year are done and dusted already. Budget22, interest rate revision meets, Omicron, et al have come and gone, but not without reshaping 2022's real estate playbook.
Without much ado then, here are the big changes that met our eye:
🍎 FOMO: Fear Of Missing Out is a thing after all. Interest rates are at record lows but the armchair economist inside all of us knows that sometime in the near future, interest rates are going up. This also means the cost of mortgage today is probably the lowest... ever. Homebuyers know this and they are buying homes without further delay.
🍏 Growth Shifting To Tier 2 and 3 Cities: With the Indian economy climbing back on track, housing demand is healthy again, and due to affordability concerns, hybrid working and congestion in metros, real estate developers are now following homebuyers to small cities.
🍎 The Office Is Changing, Not Going Away: Hybrid working and employee preferences have started to push employers out of high-density core markets into larger, cost-effective locations. And no matter what the headlines may say, the good old office is by no means dead. In fact, it is upgrading and adapting, turning marquee investors bullish again.
🍏 Quantitative Analysis Is In: By deploying AI and machine learning in their investments and by making up for the inefficiencies in commercial real estate data, new age startups are looking to find opportunities where there is historical growth and pricing is dislocated from value.
🍎 Consolidation In Proptech To Continue: Embedded finance, IoT, and digital solutions for property sales and management are expected to continue evolving in 2022. As real estate tech continues to mature, more merger and acquisition deals between proptech firms will likely occur this year.
🍏 Rising Construction Costs Will Benefit Existing Assets: Inflationary impact was felt across the world in new construction, as materials drove project costs up significantly. This inflationary pressure will continue to impact construction costs. As a result, replacement costs will continue to rise and existing assets will likely benefit from demand shifting in their favour.
More Homes = More Warehouses
The pandemic has changed us in many ways but the biggest among them are:
📎 Our new found love for all things gluten free, and
📎 Our never ending crave for even-faster deliveries
And on closer inspection, you will realise that faster deliveries only mean one thing - the warehouse and logistics hub belting out your under-10-minutes order is not too far away from you.
A Positive Correlation
So, the more houses that are built, the higher the number of delivery points there must be, and expanding cities are putting further strain on the growing pressure placed on the warehousing and logistics business.
Workaround?
Dedicated logistics hubs at strategic points both outside city limits and within them, and government provided land, infrastructure and single window approvals to fast track private participation in sustainable warehousing creation.
Proptech Things We Are Watching
The pandemic has changed us in many ways but the biggest among them are:
📎 Our new found love for all things gluten free, and
📎 Our never ending crave for even-faster deliveries
And on closer inspection, you will realise that faster deliveries only mean one thing - the warehouse and logistics hub belting out your under-10-minutes order is not too far away from you.
A Positive Correlation
So, the more houses that are built, the higher the number of delivery points there must be, and expanding cities are putting further strain on the growing pressure placed on the warehousing and logistics business.
Workaround?
Dedicated logistics hubs at strategic points both outside city limits and within them, and government provided land, infrastructure and single window approvals to fast track private participation in sustainable warehousing creation.
Zillow: Being A 'Market Maker' Can Cost You
How much? Say, around 881 million dollars.
Yes. Zillow made real estate headlines recently when it reported a loss of USD881 million on its house-buying business in 2021, and what's most impressive about its black-to-red journey is that home prices rose dramatically for much of 2021.
How On Earth?
Zillow's iBuying initiative went kaput in the middle of October and it stopped flipping houses for the remainder of 2021, and as it's core money spinner halted, profitability sank like a stone in a lake.
FYI, flipping, akin to turning over an omelette on the pan, refers to buying a house for X, doing some repairs or changes if needed and on a better day, selling it at a higher price, say 1.25X, turning a quick profit.
But iBuying, with all the tech and big data powering it, is still not a fully automated process, and that’s where Zillow got into a soup.
The firms that do the iBuying engage a representative to physically inspect the property and do a gut check on the offer. Zillow didn't have the requisite manpower to keep the valuation process accurate and running. The rest is in the P&L statement.
Market Maker Aspirations
“Our aim was to become a market maker, not a market risk taker,” Zillow founder Rich Barton said in a letter to shareholders, addressing the failure, and Barton’s quote hints at another problem with iBuying, per Alan Cole.
Market makers don’t want to invest in their market, in the sense that someone like Warren Buffett might.
Instead, they want to trade with impatient buyers and sellers, and earn a sort of patience premium rather than develop a deep thesis about the future of the assets they’re holding. They want to keep minimal inventory, sabotaging their own market making ambitions.
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An elite corps of groundskeepers in arid Qatar are responsible for 144 green, lush fields - 8 stadium pitches and 136 training grounds.
To protect the football grounds from the sandman, they blast chilled air through nozzles directly at the turf, tending luxuriant patches of green dotted amid the grey of Qatar's desert and concrete. All for the love of soccer.
Have a good day. 💚
☕ The Crew@Ginger Chai