Global uncertainty for property

Listen to panel chair LaSalle Investment Management’s global head of client capital group Jon Zehner discuss what he considers to be the most significant global threats to the industry

A vote leave at the EU referendum could plunge the UK into a recession of our own making.

That was the outlook from CBRE Global Investors’ head of EMEA Jeremy Plummer, speaking on a panel at the Urban Land Institute’s UK annual conference 2016.

“We are seeing a complete seizure in investment activity which I think will remain for the next month,” he said.

“David Cameron said yesterday this would be a recession of our own making and I think that is absolutely right.”

But Brexit is just one of a list of global threats facing the property industry.

Donald Trump gaining power in the US and more extreme far-right voting globally implies a “particularly unstable world”, Plummer said.

“So it is interesting that in our global real estate forecasting at the moment there is a very consistent and not very differentiated view of where the real estate market is going.”

He said while there was a moderate trend for economic growth flatlining, real estate trend back to inflation of 1-2% and core real estate returns for the long term at 5% or 6%, there was “probably less confidence in that as the actual outcome than we have seen in a while”.

AXA Real Estate Investment Managers’ global chief investment officer Dennis Lopez, who is based in Paris, said European cities were likely to pull business away from London in the event of a Brexit.

But he said there were still good investment opportunities “if you are in at the right price”. He said AXA was avoiding investing in the regions because after the 2008 financial crash all markets stopped except Paris and London.

“We are doing a lot of work looking at the global cities,” he said. “From our perspective it is really cities that matter.” While AXA is looking at Brazil, China and India he said those places required a huge amount of effort in terms of rules of law, valuing of contracts and currencies. “You are better off sticking with the big cities,” he said.

Goldman Sachs senior economist Kevin Daly said a vote leave would create “quite extreme uncertainty” for investors in the short and medium term. He pointed out that the UK would have to negotiate its trade agreements with every other country, because all trade deals currently exist via the EU.

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