Who’s Ready to Pounce?


My visit to our investment partners in the Gulf last week provided an opportunity for me to focus on the current status of the global real estate environment. I can’t recall a post credit crunch time when so much was changing.

Whilst most international property investors have their core currencies in which they hold both assets and liabilities, timing any currency exchanges to seek the best returns, everyone is conscious of the prevailing relative value. Broadly, the strength of the US economy has strengthened the Dollar, the Euro driven by the European Central Bank’s quantitative easing has weakened and Sterling is somewhere in-between. So, do you choose the better economic prospects of the US or the relative value of Continental Europe? Both make sense to me.

What is helping the decision making is the rapidly falling price of bank finance. As we seek finance offers for new acquisitions the margins seem to ever fall. Meanwhile, as I shared with a conference audience at the end of last year, the interest rate swaps in most currencies are at their lowest level for five years. All of which makes the cash yields available to investors more attractive than they have been for many years.

The dramatic fall in oil prices came as a surprise, or at least it did to me. Suddenly consumers are finding more money in their pocket after they’ve filled up their car and heated their home. What do they do with the money? They spend it. Retail sales in the UK are up, as are the share prices of the retailers themselves, particularly for those outside of the pricing war between the food supermarkets.

Whilst we’re on the UK, the national election is less than 90 days away now. Historically the residential markets have slowed down as an election approaches, which has also turned out to be case again this year, but we have also picked up on a slight pause in the commercial real estate markets as well. Feels like a good buying opportunity.

My conclusion: Change creates opportunities for those who can move quickly. Who’s ready to pounce?

Author Philip Churchill