Real Estate: Nothing New, Or The Sands Of Change?

Behind its façade of growth, the real estate sector faces uncertainties: unstable political outlook, risks of macroeconomic chaos, emergence of price bubbles depending on the location's attractiveness, a possible rise in interest rates, technological changes... All of this has given us plenty of food for thought this year in Cannes at the MIPIM real estate conference. At least it's sunny down here!

These uncertainties, however, have not discouraged investors, who are still searching for the risk diversification and stable cash flows offered by real estate investments. These benefits come alongside the well-established rule of prudence in real estate as an asset class, i.e. investing in brick and mortar. Heavy attendance at this year's MIPIM conference seems to confirm this appetite... unless this is a final bounce before the much-dreaded market downturn?

Real estate in real time

Recently it has been difficult to distinguish clear trends in real estate due to many contradictory signals, and 2017 should continue in the same way. On the international scene, after a turbulent 2016 (Brexit, the US election, ongoing shifts in international relations), more elections are on the agenda and diplomatic tensions continue to pop up.

One such turbulent area that has already caused heated discussion is what's happening with our British neighbours: on the day after the Brexit vote, not many people were still betting on the UK's real estate horse. As of today, however, despite a decrease in volumes, investors are interested in the London market. What's more, the collapse of the pound has created opportunities for foreign investors wishing to get their hands on assets located in the UK (especially London), given that these assets had been extremely expensive previously. Thus, there's been no slump for the United Kingdom as of today, even if nobody knows whether the worst is yet to come as the final trigger of Article 50 is now imminent. A few renowned London asset managers have taken the temperature on this situation and have decided to create "on-shore" structures on the European continent as a result, so as to maintain easy access to their real estate funds for EU investors (thanks to the AIFMD rules). Some of them have recently announced that they will develop a presence in Luxembourg.

On...