Estate advisory company Colliers International said yesterday there was no end in sight to the property market’s bull run. But the timing of interest rate hikes and geopolitical risks could threaten the current cycle.
Companies such as Land Securities have questioned how long the current upturn in the commercial market can last, following a sharp improvement over the last six years.
The chief executive of the UK’s largest listed property firm Rob Noel said last year that it was entering a “de-risking phase” and cutting back on acquisitions as the market nears the top of the cycle.
However, Colliers said yesterday that the increasing weight of international capital and improving debt availability meant the property cycle’s stage may last longer. “These levels of investment are unprecedented,” Colliers’ economist Walter Boettcher said yesterday.
“Weight of capital as an investment driver is certainly not a new phenomenon, but remains undiminished in this particular cycle. What is new is the extent to which property investment has become globalised with funds needing to reach beyond their domestic borders to satisfy their target allocations to property.”
Investors’ interest in real estate – from sovereign funds with huge pension pots to private equity – has soared due to low interest rates, and property typically offering higher returns compared to bonds or equities.
Cross-border investment worldwide reached £280bn in 2014 and Colliers believes it could surpass 2007 levels of £366bn as countries such as China step up their investment overseas.
Boettcher warned that there was a dangers of “too much money chasing too little assets” and said investment into large infrastructure projects as airports and universities was vital to help boost economic growth and strengthen the property cycle.
“We don’t want a strong balance sheet, we want investment in development to drive regeneration,” he said.
Colliers president for the Americas Brian Ward, said: “We are in uncharted waters. We are six and a half years in, no sign of inflation and in uncharted waters, as to where we go from here.”