• EMEA

Clogs, Currencies and Cannes

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Quintuple Dutch? In the UK, there has been only one coalition government in the past 50 years, with two-party politics dominating. In the Netherlands, the political landscape is very different. In order to form a government following today’s vote, it is likely that five different parties will need to join forces. Furthermore, and despite being favourite to win most seats, it appears that Geert Wilder’s PVV will not be one of these, with most other parties having ruled out a partnership. Therefore, the result may well be benign, with Nexit remaining very unlikely. This is a perspective supported by bond pricing, with greater yield spreads developing for French bonds (0.65% over 10-year bund; compared with Netherlands: 0.10%), highlighting investors’ greater wariness of the French election results.

Pegging There has been much talk about the ‘collapse’ of sterling since the EU referendum and the associated spur to international real estate investors. Certainly, the fall in sterling has been the most observed result of the vote so far. But how dramatic is this? The pound’s position against a strong dollar is the weakest since 1985. Consequently, sterling has also performed poorly against currencies pegged to USD (most Middle Eastern, Hong Kong etc). However, the pound last traded at this level against the euro as recently as summer 2013. And so we can see that those currencies pegged to the euro (most of wider Europe and Africa) do not enjoy such a relative advantage (there being a similar story with some floating currencies such as the Australian dollar). Meanwhile, the Chinese Renminbi, which (officially) decoupled from the dollar last year, has been steadily losing ground against its former peg, which together with a weakened growth outlook is precipitating capital outflows, in part to UK real estate.

Bronze medal Hot off the press comes C&W’s latest research on global capital targeting real estate, ‘The Great Wall of Money’. Encouragingly for the UK, and in spite of Brexit, it remains the third most targeted global market, even after accounting for sterling impacts. In part this may reflect a bullish view on the UK’s long term prospects outside the EU. Equally, in a much broader climate of enhanced geo-political risks across the globe, this could reflect a sober analysis of the UK’s relative position in spite of the challenges that lie ahead. In the wider report, we also find that for the first time in history there is more money targeting APAC than EMEA. This is amid a general fall in the level of global real estate debt, due to a drop off in loan originations. Download your copy of the full report.

Wish you were here? If you’re looking around and wondering where all of your colleagues have gone, they’re probably at MIPIM. And in which case, you’re not. But never fear, there’s always the opportunity to share a budget hotel room on La Croisette next year. The annual property conference – which typically coincides with a spike in purchases of pocket-handkerchiefs, lanyard holders (Cushman & Wakefield red this year) and bottles of Peroni – is now in its 27th year, and finding somewhere to stay, in competition with 23,000 others, has never been harder. At the time of writing, there are just 6 hotels (of 1,657) within a 3 mile radius of Cannes that have availability for tonight. If you’re still looking for somewhere, these include: Acci Cannes – a one-bed apartment for the bargain price of £1,308 / night – or for the more cost conscious, the 2* Neptune for just £198 / night at a short 48 minute walk to the venue. Alternatively, why not pop down to R7.G9 – our stand (not a Stars Wars droid).

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Richard Pickering, Head of UK Research & Insight.

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