For those who believe in property cycles, 2015 was the end of the beginning. Since 2009 almost everything has been heading upwards and most investments have been somewhere between productive and extremely lucrative. European Real Estate company shares increased by multiples between 2x and 10x; so did real estate debt securities; so did the equity portion of geared real estate investments. In nominal money terms, the best properties in major European cities could be sold at more than the money value at the peak of the 2006/07 boom.
Within the overall picture, the euphoria has to be tempered:
- Not every listed real estate company survived the squeeze in values ;
- Not every bond survived and even amongst the survivors some are still on life support;
- Many uncelebrated markets have scarcely moved since the lows on 2008 and are well short of their previous level;
- Money values are not what they were – inflation even in the last 7 years has taken some 20% off the real value of currency.
In 2015, however, the party started to run of steam. Central London prime residential has faltered under the weight of new build, tax attack from the UK authorities and appreciation of sterling. The values have stopped advancing and we are well into the “pretend” stage of a readjustment. Signs elsewhere in Europe are also mixed. The funds that bought offices in Berlin are selling them now. Few sectors are unbridled buys.