Real estate robust in face of global uncertainty
A new report by BNP Paribas Real Estate - Cycology - using Ipsos research indicates an industry better prepared to face future political and economic shocks than it was in 2007.
A new report by BNP Paribas Real Estate – Cycology – indicates an industry better prepared to face future political and economic shocks than it was in 2007.
BNP Paribas used Ipsos research into the sentiment of real estate leaders, occupiers and academics and their views on the key drivers of the real estate cycle, combined with analysis of past cycles and traditional forecasts. Cycology’s key findings include:
- Uncertainty is certain and the new normal.
- History doesn’t predicate the future when it’s so uncertain.
- The next cycle will be shorter and bumpier.
- Supply, demand and pricing are still important ‘fundamentals’ but we should add in capital flows, politics, currency and debt ratios which are now equally important and will be equally critical determinants of price going forward.
- We’ve had supply and demand cycles and crashes, we’ve had financial, the current cycle is expected to be political
- Global cities provide a relative safe haven, and despite short term uncertainty, London is felt to offer long-term growth.
- Investors feel they have learned lessons from 2008 and are insulating their portfolios from further shocks, pricing in shock, and diversifying as a defence, focusing on low volatility markets, residential, hotels, leisure, prime retail.
- Following the last financial crisis industry governance has increased both internally and externally. Internally investment committees and compliance have become mainstream, externally Basel III and Solvency II have sought to better control the exposure of insurance companies and banks to another capital value crash.
- Investors believe they are more risk adverse post 2008.
- Donald Trump’s election is not as important as Brexit for the UK market the market was going through cyclical change before Brexit and Trump, however these events will have accelerated the cycle.
Ipsos’s research involved interviews with 22 investors/developers, 4 academics, 3 occupiers. The objective was to understand the real estate cycle, behaviours and ‘culture’ from the perspective (and in the words of) those embedded within it.
