Editorial
| DOI | https://doi.org/10.1108/JPIF-07-2016-0051 |
| Pages | 550-551 |
| Date | 05 September 2016 |
| Published date | 05 September 2016 |
| Author | Nick French |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
Editorial
Property, uncertainty and the European Union (EU) –Part II
It might only be a matter of weeks since I wrote an editorial when I hinted that the UK
may be leaving the EU. And, indeed, that came to pass. Many people were sur prised
and shocked but they had the misplaced trust that rational thought would outweigh the
zeitgeist of the country for change. The latter won as it will win around the world this
year. I am certain that Donald Trump will win the American presidency on the same
surge of nationalism and popularism, that is, worryingly, sweeping the world. I am also
certain that in the next 24 months that more countries will leave the EU. If the vote were
given to all countries, then most would leave. That is the stark reality that the UK
Brexit vote has revealed. The EU is deeply unpopular and at the end of June 2016,
it changed forever. As I said last time, the new EU without the UK is a different animal.
It is divided and, without the UK’s economy it is much “less”than it was before.
But I do not say this as purely a political commentary. I say this in the context of
property investment and finance as the name of this journal demand s. I stressed last
time that we were entering a new world of uncertainty that, from an investment
viewpoint, offered opportunities and pitfalls. From a valuation viewpoint, it makes a
difficult job (to estimate market price) even more difficult.
In the investment world, we have already seen the immediate impact of Brexit on
property funds in the UK. As of the 15th July, six of the UK’s biggest commercial fund
managers suspended their property funds (including Aviva Investors, M&G and
Standard Life). A rush of investors wanting to liquidise their holdings meant that the
integrity of the funds was in jeopardy. It is funny how unsophisticated markets can be.
A herd instinct that is borne out of fear and uncertainty. That is the pitfall. The
opportunity is that prices have fallen and there are a number of cash rich buyers in the
market looking for bargains and taking a longer term view than the immediate panic.
For nervous investors, the analogy of falling into shark infested waters hold true. If you
do nothing and do not splash, you are less likely to be bitten but if you splash around
and panic, then your fear of a loss is realised as the sharks close in on you. The same
has been seen in the stock market but, being amore transparent market, it is easy to see
that the falls on the 24th June and the days following have all but reversed and the
pound has stabilised (albeit at a lower rate) to the dollar. All the meltdown predictions
have not come to pass. But it is still early days. I think that the euro has more problems
than the pound. At the same time that Brexit grabbed all the European headlines, a
“small”€4 billion bailout was made by the EU to Italy. It hardly got more than two
column inches of coverage and, yet, could be much more significant than the Brexit
vote. Commentators have referred to it as “contagion”but it would have happened
anyway. Brexit is the catalyst of the reordering and retreat of the EU and not the cause.
Journal of Property Investment &
Finance
Vol. 34 No. 6, 2016
pp. 550-551
©Emerald Group Publishing Limited
1463-578X
DOI 10.1108/JPIF-07-2016-0051
In this issue, the authors are presenting the first of two special issues on valuation. Valuation is at
the core of all markets and all decision making. The importance of an educated and competent
valuation profession cannot be understated. This issue presents papers looking at the role of the
valuation profession in developing models that are appropriate for reflecting the pricing of
sustainability and, in separate papers, non-market-based activities.
550
JPIF
34,6
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