COMMENT Last week, rather than travelling to the south of France, my schedule took me to Hong Kong, China and India. A busy week, but one I was looking forward to, not to escape the Croisette, but more in the hope of avoiding the constant presence of Brexit.
I departed with one Sunday newspaper suggesting growing public support for “no deal”, fuelled by Europe’s response to current negotiations. I left knowing it was going to be a busy week in politics and anxious that some clarity of direction would be achieved. Little did I know the result would be even more muddled.
My schedule included a meeting with the heads of all Knight Frank Asia-Pacific businesses, a client event in Hong Kong, a visit to our new office in Shenzhen and then finally to Mumbai for a board meeting and the India launch of our 13th edition of The Wealth Report, an event to be attended by more than 800 clients.
As I arrived in Hong Kong, I recalled that previous visits had coincided with the EU referendum in June 2016 and the election of Donald Trump. So what would happen during this visit? Truth is, more meaningful votes producing less meaningful outcomes. However, this series of events gave me access to broad and up-to-date perspectives on how the Asian markets saw the political debacle in the UK and the real estate markets post-Brexit. The result was largely a surprise, and certainly consistent.
Pretty much without exception, everyone I spoke to asked what the environment was like and what I felt the out-turn was likely to be. While it felt rather uncomfortable, the consistent response I gave was that it didn’t feel at all good and that I had no idea, explaining that I wasn’t sure anyone else did either.
Why is it taking so long?
It became clear very quickly that, while people were looking beyond Brexit, they were completely perplexed as to why the process was being managed “inadequately” and taking so long to resolve.
The reality is that the vast majority of investors said there were far greater issues that were distracting them beyond Brexit. Core Asia is focused on the ramifications of the China/US trade discussions. In India, their attentions are being drawn to forthcoming elections now announced for the spring, while also being nervous of the US administration changing its approach to investment in India, which has been such a boost to the local real estate environment.
One of our clients mentioned that they had recently been to a conference which listed the top 10 “things to worry about”, and Brexit didn’t even make the list. My, I look forward to that day in the UK!
In all these regions, wealth is still being created, and that wealth is seeking greater and greater diversity. Some of the statistics are extraordinary.
In Shenzhen, I was informed that it now has more high-rise buildings than any other city in the world, and has a GDP that has just exceeded that of Hong Kong.
While the Chinese and other economies are going through a period of less aggressive growth, they are nonetheless creating surpluses that will need to be reallocated. In India, office take-up is at record levels, and the investment in infrastructure is beyond the levels seen in recent history. GDP is moderating, but some still forecast that India will be the fastest-growing economy over the next 10 years.
Buying opportunities
The conclusion is that Brexit, or rather the way we are dealing with it, doesn’t look good, but the overarching strength of opinion is that, whatever the outcome, it will create “one of the best buying opportunities for a number of years”.
Key is the current hesitation around investment decisions and how long this will last – an issue which sadly lies in the hands of our politicians, here and in Europe. There is little doubt in my mind that the prospect of real clarification around Brexit will create a bounce.
In the next couple of weeks, I will be visiting Nigeria and Kenya. Doubtless another different perspective – let’s see.
Alistair Elliott is senior partner and group chairman at Knight Frank
