InvBrief – Autumn 2016

Property investment market – Autumn 2016

Headline figures make for somewhat grim reading, particularly capital value movement and cumulative total returns over the quarter. However, this obscures the fact that much of the negative effects of the referendum result occurred in July and we have seen a subsequent recovery in September. A marked increase in transactions over this month reflects a rationalisation of the market on behalf of investors, apparently satisfied that pricing volatility has stabilised, for now.

A correction in the commercial real estate investment market means that whilst certain investors will have seen a reduction in net asset values, there are now new opportunities in the market, given reduced asset prices, an expansion in the yield premium between gilts and real estate and low interest rates. A devaluation in Sterling has already sparked renewed interest from international investors, particularly those holding dollars.

This, of course, does not mean we are in for a smooth ride. Markets, and not just those in the real estate sphere, have tried and failed several times to predict political events. The new reality is that this cannot be done with any certainty.

Theresa May’s flirtations with a “hard Brexit” at the Conservative Party conference triggered the latest in a series of market corrections in the wake of political events – the most notable being the referendum itself where traders incorrectly bet on a victory for “Remain.”

Virtually every major investment class from currency, to shares, to bonds have seen notable adjustments post-referendum. So have we entered into a new paradigm? For now no, but to coin a phrase we should expect the unexpected.

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