Editorial

Citation

French, N. (2012), "Editorial", Journal of Property Investment & Finance, Vol. 30 No. 6. https://doi.org/10.1108/jpif.2012.11230faa.001

Editorial

Article Type: Editorial From: Journal of Property Investment & Finance, Volume 30, Issue 6

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  It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness […](Charles Dickens, A Tale of Two Cities, 1859).

Ok, it is true that Charles Dickens was not referring to financial markets when he wrote A Tale of Two Cities but it is interesting that every generation seems to have its own flirtation with the dichotomy of good and bad. In the property world that is happing now. At the risk of this editorial becoming a list of quotes and platitudes, I was speaking at a conference last week, highlighting the impact of uncertainty on the property market in this downturn and a delegate came up to me afterwards saying “long may it continue”. As an advisor to a cash-rich investor, he had never been busier in the UK investment market. He was eulogising about the “discounts” that he was able to negotiate on (what he still considered to be) good property investments outside London. Too many properties, too few buyers and, simple economics dictates that prices will fall. The uncertainty just exacerbates this phenomenon.

So why is this happening? Many much more able commentators than I have dissected the world economy over the last five years and they, and most politicians, have yet to find solutions. And, in fairness, the woes of the world economy are multilayered and multifaceted; toxic loans, complex financial vehicles, lack of regulation, personal and corporate greed, lack of austerity/too much austerity, etc. But, there is one element that seems to be overriding and all encompassing. And that is the Euro and its continued existence as a single currency for all the countries currently in the Euro-zone. This is the route of all the uncertainty in Europe and, by ramification, beyond.

Last summer, I was sharing the platform at a conference in Athens[1] with two other eminent speakers (Robert Peto, the then President of the RICS and Sotiris Tsolacos of CoStar) and after we had made our respective keynote addresses, the Q&A session concentrated on just one question “what can be done to re-energise the Greek property market?”. As one, although all our answers were diplomatic and respectful, we responded that the future of the Greek Market (property and general) was intrinsically interlinked with the Euro. And, it was my personal belief that, to revitalise the market, Greece needed to leave the Euro.

Since then a year has passed and, via a number of ineffectual elections, we are no nearer a conclusion. In Greece it is the “worst of times”. There is still uncertainty. But the ripple effect, has meant that London is experiencing a property boom that has become the “best of times”. Greek money and indeed money from other Southern European countries such as Italy and Spain (with their own debt and banking problems) has been flooding into the London commercial and residential markets (Savills, 2012). London is seen as a safe haven. It is a flight to safety. The weight of money (which in fairness also includes substantial funds from Eastern Europe, North Africa and the Middle East), plus the weakness of sterling, is pushing up prices way beyond any sensible assessment of their worth. An effect that is in direct contrast to the fortunes of property prices in the UK outside London. Once again, “the best of times” sits side by side with “the worst of times”.

It is at times like this that a good understanding of markets, and the interlinks between economic markets, financial markets and the property market that will help investors spot the opportunities. In January of this year, in an article in Property Week, Anthony Leonard of Hines said:

It (the property market) will be about the Euro in 2012. As long as it continues as it is, banks won’t lend and occupiers won’t make decisions (Property Week, 2012).

Uncertainty breeds uncertainty. But uncertainty offers opportunities to those who understand the markets.

Note

1. 2nd Academic Conference in Property Management, Valuation, Development – Athens, 23-25 May 2012.

Nick French