European real estate could face double-digit losses next year as the sector continues to be volatile and unpredictable, James Wilkinson said in the final session at the EPRA Conference in Paris yesterday.
BlackRock’s European chief investment officer for real estate said the European market could suffer losses of between 10% and 20% next year, although the spread between high and low performers makes region-wide conclusions misleading.
Markets could react strongly to wider policy changes, he said, pointing to the 10% fall in UK stocks that followed a June 2014 speech by Mark Carney in which he hinted at a possible interest rate rise.
Wilkinson said: “I could describe some plausible scenarios for why the whole of Europe is down by 20% in 2017.
“Is it so far-fetched that we start talking about normalisation of interest rate policy or a change in monetary policy in the eurozone at some point in 2017? That could move the markets by 10 to 20%, just like that.
“On average we see more upside from the Asia Pacific than from the US or EMEA, but averages are a pretty terrible ways to judge things. Within each region there is huge divergence.”
Wilkinson said that the spread in European property companies’ returns could range from -25% to +25% next year, depending on the quality of asset management.
Linus Wen Sheong Lim, co-chief investment officer at Singapore’s Phillip Capital Management, said that predicting the continent’s performance next year would be “throwing a dart in the dark”.
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