22 | LETTERS Your shout INBOX Dear editor,
There are currently dangers in the real estate market, and one of these is the risk that countries will default on their debts. Greece is the country with the biggest problems at the moment. If these
fi scal worries were to spread, it would also be negative, probably infl uencing the supply of credit via banks or the bond market. Renewed economic setbacks would be negative for real estate. The same
applies to the existing infl ation risks, especially in parts of Asia. Also on the negative side, there is uncertainty about how big the economic
consequences will be when major central banks begin tightening their monetary policies, something that the central banks in such countries as Australia, Norway and India have already begun to do. In many countries, interest rate hikes will presumably not begin until late in
2010 or early 2011, but it is important to keep an especially watchful eye on interest rate trends.
China leads the way in Asian crackdown In addition, there are clear price-bubble tendencies in certain parts of the real estate market in China. The Chinese government has begun to tighten its economic policies, for
example by boosting the reserve requirements for banks and taking various other steps to raise market interest rates. The authorities there are also conveying the message that Chinese state-
owned companies − which are not real estate companies − should not build new properties. It remains to be seen how much eff ect these measures will have, but if the price
trend in portions of the Chinese real estate market continues at its current pace, the measures carried out so far will not be enough. Singapore has introduced a stamp duty, an example of another method to try to keep the price trend in the real estate market under control.
Mixed market is reawakening Many asset classes have gradually recovered, and this is now also true in portions of real estate as an asset class. The process has been driven by investors who want returns on their capital. To a growing extent, they have regarded real estate investments as a good way
to generate low-risk returns. Well-managed properties in good locations have been the focus of this fi rst
investor-led recovery phase, with the result that the prices and loan-to-value ratios for these properties are similar to what we became accustomed to in much better times. For well-managed properties, the situation can thus be largely considered as normalised. The situation is diff erent for properties that are not well-managed, and
in order for this market to normalise, the next phase of the upturn will need to begin. The world economy must improve further, and what we want to see above
all is that many countries get unemployment under control. The fi rst signs of this have also come, but the process may be lengthy and
complex.
Think longer than a year ahead In the short term, there are risks when central banks withdraw their
stimulus measures (activate their exit policy), but the downside for the real estate market is likely to be limited for investors with a time horizon of a year or longer. In the next few years, we expect returns that are roughly equal to a normal
long-term return: risk-free interest plus 3 to 5 per cent. We have real estate investments that represent a few per cent of some of our management mandates. We expect to be able to increase this percentage little by little as the world
economic recovery continues, but considering fi scal uncertainties and bubble tendencies in China, we are “hurrying slowly.”
Rickard Lundquist
Portfolio strategist, investmentsStrategy SEB Private Banking/Wealth Management
PEOPLE Opinions and letters from OPP readers. Email geoff .
h@opp.org.uk
Topic of the month : It is not just the the Greeks defaulting that property needs to worry about
A slow recovery looks likely says senior fi nancier
www.opp.org.uk | AUGUST 2010 Have your say | OPP Online has
launched new, dedicated property forums for agents and developers. To join the latest debate, visit
www.opp.org.uk
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68