Higher rates don't mean the death of housing, says Blackstone's real estate chief

Blackstone Real Estate's Gray: Housing market a bright spot in the US
Blackstone Real Estate's Gray: Housing market a bright spot in the US

Concerns about the impact of what's expected to be higher Federal Reserve interest rates on the property market are overblown, Jonathan Gray, global head of real estate at Blackstone, told CNBC on Tuesday.

"We're later in the cycle, but some people are getting a bit too negative," said Gray, who manages $103 billion of investor capital — nearly a third of Blackstone's total assets under management. He controls more than $200 billion worth of real estate.

There's too much of a focus on rates, he said. "There's a [false] sense that owning real estate is the same as owning a bond."

"Real estate, like stocks, can see earnings growth," he argued. "And that's what we're seeing today because of favorable fundamentals."

In recent periods of rising rates — such as the early 1990s, the late 1990s and the mid-2000s — the property market "did OK," Gray said.

"We don't expect to see the growth in value in the next couple years that we've seen in the last four or five years," he admitted. "But we don't expect to see some sort of sharp decline in the near term."

Blackstone, a diversified investment firm with specialties in real estate and private equity funds, also has a major holding in Invitation Homes, a nationwide home rental company.

"The housing market is definitely a bright spot in the U.S. [economy]," Gray asserted, saying home building is not keeping up with demand and population growth. "The result of that is you're seeing rising rents and rising home prices. And we expect that to continue."

"We own about 100,000 either multifamily homes or single-family homes for rent. And across the board, across the country, we're seeing strength in that area," he said.