EXPO REAL 2018 – The Real Estate Industry & Geopolitics

Ten years after the high point of the financial
crisis, its effects on the real estate industry continue to be felt: high property prices,
low interest rates, high investment pressure and low returns on investments. But the industry is doing well. It has evolved and has become more international
and more digital. Sensitivity to the uncertainties of the global
market remains omnipresent, however–also at EXPO REAL 2018, the biggest real estate
industry get-together in Europe. Geopolitical risk has had impact around the
world, so if you look at markets like France, which had a presidential uncertainty twelve
to eighteen month ago, France now seems to be coming out of that, so we are seeing a
little bit more activity in the French market. The German market had a little bit of political
issues earlier this year. That seems to have been overcome now by investors,
who are coming quite fast back into the German market. So political uncertainty does have an impact
on the real estate markets but it seems to be quite short-lived. I think that the geopolitical vibrations are
currently being overrated, and have little to do with who is in the White House, or whether
Brexit will happen or not. The big issues are the climate, a sometimes
alarming concentration of wealth in just a few hands, and the refugee problem – with
64 million refugees who right now, somewhere in the world, are looking around for a home. The greatest risk in the real estate market
today would have to be the rapid rise of the interest rates. However on a relative basis our interest rates
– even if they take a significant step forward – are at historical lows. Despite the geopolitical situation the industry
continues to look to the future with optimism – and is relying on a variety of investment
locations. What we’re seeing right now is capital flowing
from Asia into European markets. At the moment it’s still very focused on
hotspots. In addition we certainly see opportunities
in the B and C locations as well, if they have good forecasts where demographics and
economic development are concerned. The B and C locations are clearly less affected
by geopolitical turmoil than the A locations because a far more defensive product is involved. In other words, rents are much lower here:
even if the economy went through a difficult period, these tenants would continue to be
able to pay their rent. The fact that there is hardly any speculative
new construction in these B and C locations also plays a role.

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