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INREV 2016: global index launched, geopolitics center stage

INREV announces new performance index as talk at its Vienna conference turns to geopolitics and the ripple effect on real estate.

Real estate returned 8.75 percent between 2005 and 2014 compared with 4.9 percent for investment grade bonds and 6.2 percent for global equities, according to initial findings from a new performance index unveiled by the European Association for Investors in Non-listed Real Estate vehicles.

The organisation’s Global Investor Real Estate Performance Index, an index that tracks investor performance, was unveiled at the INREV conference in Vienna, Austria, today.

The index is intended to enable investors to track their performance against their peers. It takes account of all four real estate investment routes – listed, non-listed, direct and debt – and covers activity in all major real estate sectors, including retail, office, industrial and residential.
Real estate’s performance against bonds and equities mirrored the general confidence in the asset class at this week’s conference, though the conversation moved on to discuss how geopolitical factors such as elections, Brexit and migration as a result of global conflict might affect the real estate industry both positively and negatively.

Phillip Coggan, capital markets editor at The Economist, spoke about the potential of a bubble building. He highlighted figures from Knight Frank which suggested European property investment was up 25 percent on 2014 but added that prime yields were down to a relatively low average of 4.8 percent.

Coggan, however, compared this figure to certain government bonds around the world including Turkey, 4.5 percent, Colombia, 3.7 percent, and Mexico, 2.1 percent.He said: “Lots of investors are desperate for income. In this low growth, low inflation world that means low interest rates. The yield will always lure investors into property. The big risk is politics with Trump, Corbyn and Le Pen potentially on the horizon in the US, Britain and France respectively.”

In a poll of attendees about the Brexit, taken at the beginning of the conference, just 13 percent of investors thought Britons would vote leave, while only 5 percent of attendees said they would be more keen to invest in the UK post-Brexit against 68 percent if Britain stayed.

Coggan said he felt the main beneficiaries of a Brexit would initially be cities such as Frankfurt and Paris and admitted there could be a “domino effect” should Britain vote to leave. He said: “People are underestimating the possibility of a Brexit. I think there will be about a 4 percent to 6 percent difference in the vote, perhaps 52 percent to 48 percent or 53 percent to 47 percent. I normally stay up for elections so will be keeping a close eye on things on June 23.”

Eloy Lindeijer, chief investment manager at Dutch pension fund PGGM, spoke about the human migration crisis, following global conflicts such as Syria, and how this could affect the real estate industry. He said: “Globally, there are 60 million people adrift due to war and poverty. The migration crisis in Europe is smaller than we think. It can be an opportunity with the need for infrastructure to help cope with the flow of people. It can be a positive, the big risk is that the crisis leads to populism, but it can help the economy in Europe, people will need to find jobs.”