You wouldn’t ordinarily think that too much money is a bad thing. But spending can be difficult and, let’s face it, we don’t always make the best decisions when our purses spilleth over.
The first whispers of there being too much money in the market started at MIPIM, with investors and agents quietly bemoaning the fact that they had all this cash but were struggling to find a home for it.
Then the distraction of the general election set in and with it came the fear that all that lovely money targeting the UK (and London in particular) would be directed elsewhere, with Labour’s attacks on the non-doms and the possible introduction of a mansion tax serving to lessen our attractiveness.
But with the Reds’ defeat and the collective sigh of relief from the real estate sector that came with it, chat has again turned to the weight of money targeting the UK.
Having too much money is not a bad problem to have, of course. Or so I am told. But having too much money in a low-interest environment and a diminishing number of options for where to put it (in real estate terms at least) is.
Why? Because bad decisions will inevitably be made. Assets that were unsellable are now suddenly attractive and selling for over their asking prices. Yes, the economic environment has improved and (in London anyway) the occupier markets have finally caught up with the capital markets, but has enough changed that assets that investors would not have touched with a barge pole in the depths of the crash are now sought after?
“It’s crazy,” one vendor of such an asset told me. “If you’ve got rubbish to sell, now is the time to do it.”
Talking of time, for how long will this flood of money and demand continue?
Another 10 years, according to Almacantar’s Mike Hussey. A decade more of boom. His prediction, made at the Association of Property and Fixed Charge Receivers’ annual meeting and splashed across The Sunday Times last week, has not been universally agreed upon by his peers, but it did raise eyebrows and prompt a few ponderings.
Roy March, chief executive of the top performing US-based broker Eastdil Secured, is not quite as bullish as Hussey. He reckons there are three years left of good times for both US and UK real estate. In an exclusive interview with EG (listen at http://estatesgazette.libsyn.com), he says real estate is in “a Goldilocks period: not too hot, not too cold, just right”.
Ronald Dickerman, chief executive of secondaries investor Madison International, somewhat agrees, labelling the current environment the “golden age of real estate” (p46).
Whatever you think, even a quick flick through this edition of Estates Gazette will show you that there are no signs of the inflows of cash slowing down just yet.
This week we report on an £820m funding arrangement at Wood Wharf in the Docklands (p25); on the 4% yield set to be achieved on the forthcoming sale of Birmingham’s 1 Colmore Square, prompting Carlyle to hoist a for sale sign above its Colmore Plaza earlier than anticipated (p28); and on RBS being confident enough that it will unload €2.5bn (£1.8bn) of debt in Ireland (p35), despite there already being more than €17bn of NPL portfolios on the market (p32).
Too hot? Too cold? Just right? Who knows? All I am saying is that there were bears in the tale of Goldilocks, not bulls.
Never mind too much money, what about the problem of there being too many people? Estates Gazette has teamed up with Cluttons to undertake an international competition seeking your vision of how the property industry can address the issue of over-population. Judged by some of the biggest names in international property and design, the winner will be profiled in the magazine and have their vision featured as the coveted front cover of EG. To find out more and enter, visit www.estatesgazette.com/thenextbigthing
