Finding Value Late in the Cycle: A Guide to European Real Estate Investing in 2019

Currently, real estate investors in many parts of the world face the challenge of whether to accept lower core returns or pursue higher-return strategies that are more dependant on continued economic growth and real estate fundamentals. If a slowdown materialises, these strategies could be derailed. Investors’ return and risk objectives should be cycle-sensitive, by over- and underweighting different strategies depending on economic, capital market, and property market cycle

In Europe, these considerations are compounded by the ongoing Brexit process – the outcome of which remains unpredictable. In this uncertain environment, our base case scenario continues to feature a long transition period leading to an eventual free trade area in goods and services, with the City of London retaining some form of financial services passporting rights with the EU. However, under the extreme scenario of a no-deal Brexit, the UK would revert to World Trade Organization (WTO) rules with the EU. This would drive up inflation due to the weak value of the pound and generate higher trade tariffs and non-tariff costs, and therefore represents the main risk to the UK property market.

Written by Mahdi Mokrane, Simon Marx, Chris Psaras

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