“The sky's the limit". But is this still true for today's real-estate markets?
What are the economic factors affecting property? What are the forces that are influencing European housing values today? All our views on real estate markets are now available!
The past can be used to suggest many things, with history believed to repeat itself. Some examples:
“Property values will fall if interest rates rise”. Which interest rates? Nominal rates? Real rates? What type of property: prime or secondary? Which areas?
“Property cycles are linked to economic cycles”. Is the relationship between economic fundamentals and real estate performance clearly defined? Are capital markets capable of distorting this linkage? Has property management progressed more professionally in recent years, allowing for better performances anyway?
“UK property markets will suffer a disastrous slump due to Brexit as they did in the early nineties.” Are UK interest rates hovering at similar levels presently? Can the impact of Brexit – based on facts – be fully assessed today?
We believe history will not necessarily repeat itself by following a standard pattern. But one cannot ignore that both occupational and investment markets react to events with a lot of media coverage – such as Brexit - and economic data (instantly or with a time lag). In short, some evidence of property cyclicality may eventually emerge. We are of the opinion that it is too dangerous for investors to assume that “cycles are a thing of the past”, making valuation multiples less relevant.
This year appears to be more uncertain for property investors. It is too early to say whether the various real estate markets are nearing a tipping point, ready for re-pricing.