The worsening economic situation in Europe presents a massive opportunity for the UK in 2015
as international investors and highly skilled professionals flock to its shores.
“The worse Europe gets, the better the UK performs because of the evacuation of capital and people,” Savvas Savouri, chief economist at Toscafund Asset Management, told a MIPIM UK debate on the future of real estate. “Continental Europe’s problems haven’t really started yet,” he predicted.
Europe is slowly being evacuated by anyone who is of prime age and professional – dentists, doctors, lawyers, accountants and surveyors – Savouri said. The UK is one of the countries to which those people are choosing to come. “They will need somewhere to work and to live,” he told the audience.
Savouri said the UK had never had a potential demographic shift like this and he urged the industry not to be distracted by the political uncertainty of next year’s general election, which he compared to the Y2K over-reaction. “People can get so obsessed that they can’t see the wood for the trees,” he said.
He described China as the “real deal” and said the UK was the single biggest overseas hub for Asia. “We might as well be on the moon for all the impact Europe can have on us negatively. Those of you that have invested in a European recovery, I hope you’re better card players,” he said.
Andrew Pratt, residential investment consultant at Patrizia, also predicted an increase in overseas investment. He said he expected large build-to-rent developments “to come to fruition” in all the main UK cities in the next 12 to 18 months.
“The South East Asian and Malaysian money will tend to focus on London,” he said. “We’ll be looking at the regions and we’ll start to see UK institutions coming into these markets.”
The shortage of stock in London is a challenge for the industry and will remain so next year, said Deepa Deb, partner, commercial real estate, at Berwin Leighton Paisner. But she said the effect of this would bring benefits to the regions. “The shortage of stock is precisely what has driven the thirst for demand in London. The fact that there isn’t enough stock in London means necessarily that you’re going to drive a move outside of London, which can only be a good thing.”
She said this move, combined with the government’s commitment to improve inter-city transport infrastructure, was “bound to have a positive effect”.
