_Five risks for the global property investor

Global energy sources 

News that the US discovered its largest ever oil field in 2016 was largely overshadowed by the election of Donald Trump. However, it highlights the growing energy self-sufficiency of the US, which, via shale gas and renewables, will spread to other nations in the coming decades. This will have a huge impact on global investment and trade flows, and we see more energy economies looking to diversify their future revenue streams; with implications for global real estate. Some property markets should gain from the changes, while others will have to re-invent themselves to face new economic realities.

Likelihood  – 4.5/5

Geo-political risks 

Recent tensions over North Korea have reminded us that some of the world’s centres of prosperity are located near diplomatic flash points. Conflict on the Korean peninsula would have huge implications for China, Japan, and South Korea. Moreover, the lesson of history is that when a radical threat is suppressed in one part of the Middle East, it tends to re-emerge elsewhere. Increasingly, that threat is as likely to reappear in Africa, or even Europe, as any other Middle Eastern nation.

Likelihood – 4/5

Rising interest rates 

The US Federal Reserve is already raising interest rates, and were it not for Brexit, the Bank of England would probably be increasing rates as well. While other central banks in advanced nations are still pursuing loose policy, government bonds are generally drifting higher. Property investors need to review the type of asset targeted, with more of a focus on asset management opportunities, where the yield can rise in a positive way.

Likelihood – 3.5/5

Tech dependency 

In many of the more vibrant property markets, whether it be New York City offices or distribution warehouses in the UK’s West Midlands, big name technology firms are driving occupier demand. Property markets are gaining increased exposure to the digital juggernaut, and would be hit if there were a sharp slowdown in activity by tech firms. At the time of writing, there is little sign of any deceleration from the technology sector, but such rapid expansion cannot be sustained indefinitely.

Likelihood – 3/5

Anti-globalisation 

This threat has partially receded in 2017, following election setbacks for the Party for Freedom in The Netherlands, and France’s National Front. In contrast to the tough talk in the 2016 election campaign, President Trump appears to have built a dialogue with China. Time will tell whether the anti-globalisation threat is now in retreat, or if 2017 marks a temporary setback for populist politics. Nevertheless, immigration is a ‘hot potato’ in many nations now, and if people cannot move to where the jobs are, in the future more jobs may need to go to where people are.

Likelihood – 2.5/5

The Global Capital Markets team works on a daily basis with sector experts around the world, giving investors access to up-to-date intelligence and transaction opportunities in key global investment markets.