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Real estate and a single currency

David Hutchings (Joint Head of Research at Healey & Baker, London, UK)

Journal of Property Valuation and Investment

ISSN: 0960-2712

Article publication date: 1 October 1997



Currency fluctuations have a significant impact on occupational and investment property markets. The performance of an international portfolio would be strongly influenced by the changes seen in the exchange rate of the investor and in the country of their investments. Occupational costs meanwhile vary considerably as a function of currency movements as well as rental growth. A single currency would reduce this risk. The changing economic conditions necessary to deliver a single currency are however of greater importance than the denomination of money. Examines the general concept of a single currency, rather than the specific design and implementation of the Euro as currently envisaged. There are clearly some concerns as to the stability of the proposed new European currency. If extreme, these could outweigh the advantages indicated in this research, particularly over the shorter term. Modelling capital growth and yields demonstrates the importance of exchange rates as a function of monetary policy and economic behaviour. A single currency could allow yield premiums to fall in more volatile markets as economic conditions converge, as has already been seen in bond markets. It would highlight the pricing of property as a function of fundamental demand and income security and could facilitate a more sophisticated valuation and investment appraisal practice in Europe. If EMU goes ahead it will lead to new occupational patterns and areas of investment growth. As such it is likely to generate tenant and investor activity as the most efficient and competitive locations are sought out.



Hutchings, D. (1997), "Real estate and a single currency", Journal of Property Valuation and Investment, Vol. 15 No. 4, pp. 372-383.




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