Will the Chinese turn out to be the mugs of this property cycle? The Irish splashed out £13.8bn between 2004 and 2007, the Americans just short of £14bn. Between them at least £10bn must have been lost during 2008-09. In the past month alone, the Chinese have been linked with £1bn of deals, not least the impending £650m-£800m purchase of from Blackstone.
When Blackstone is selling, it somehow never turns out to be a good time to buy. But to compare the Chinese to the Irish is to compare an elephant to a mouse. To suggest Beijing and Hong Kong buyers inhabit the same financial planet as the US funds that came over in the early noughties is fanciful.
The wave of Chinese investment in UK real estate threatens to turn into a tsunami, if this week’s Communist Party gathering in Beijing loosens the rules of overseas investment still further. Top agents are on alert to the possibilities. They should also be on alert to not selling pups to the Chinese, who won’t forget.
In 1972, Henry Kissinger asked Chinese prime minister Chou En Lai to assess the impact of France on the 1968 Paris riots, (not the French revolution of 1789, as widely reported). “It is too soon to tell,” was his famous reply. It is far too soon to tell how Chinese investment will affect UK real estate. But, hell, let’s have a guess.
In 10 years’ time the Chinese will be the largest overseas holder of UK property. The blue-chip investment deals will be doing fine – after not doing fine during a downturn. The headache will be the development sites. By 2023 the Chinese will be wishing the UK planning system danced to the tune of a totalitarian state.
Writing the rule book
The Americans include common areas when calculating rentable space; Brit’s don’t. Dubai? Best not ask. The numbers used to compare global rents are based on the flawed assumption that surveyors use the same rule book. There is no rule book. Jones Lang LaSalle says the numbers can deviate by as much as 24%.
Happily, global rules have just been drawn up, under orders from the World Bank, no less. In May, the International Property Measurement Standards Coalition was formed. A coalition of 22 property organisations has drawn up rules. Everyone, from the Americans to the IMF to the RICS have reached agreement in six months. Amazing.
What the rules are and who will feel obliged to abide by them is another matter. Please refer to former RICS president Max Crofts. The ex-King Sturge partner and current JLL consultant helped draw up the standards. Last month, Dubai became the first country in the world to adopt the rules.
Mistaking luck for skill
“We are now at the stage when the lucky start to think they are clever.” This was the slightly jaundiced view of a very senior property figure surveying the rash of barely known entrepreneurs or second-time-around merchants lucky enough to have convinced investors they have found clever ways of making money from real estate. Sadly, the laws of libel prevent disclosure. Those clever enough to have survived a couple of cycles know perfectly well who the newly clever are; trouble is, they say, the banks don’t. Here we go again…
Old guard in bloom at C&W
There was “old-guard” disquiet at Cushman & Wakefield over last month’s appointment of former CBRE City agent ?Digby Flower as chief executive of C&W’s UK business. But it only lasted as long as it took global boss Carlo di Sant’Albano to announce that Flower would be working under the eye of newly appointed UK chairman, valuer Rupert Dodson. A widely admired member of the old guard, apparently. The spirit of Healey & Baker lives on.
Sky high for MIPIM
The sky-high price of MIPIM 2014: British Airways, Heathrow to Nice on Tuesday 11 March, returning on the Friday, ticket price: £888.90. The following week: £157.90. Gatwick to Nice, on the same dates, slumming it on easyJet, just £697.41. The following week: £63.41.
