How does world politics affect European real estate?

Debt crises. Threats of rate hikes. Stagnant economies. Donald Trump. In the real estate market, there are often global factors that can affect and disrupt the industry, as shifts in demographics and the economy often change the mindsets of investors, developers, and tenants. And because you can’t exactly move real estate assets around countries the same way you can with money or shares, the industry is open to taxation and political interference. 

This was discussed by the most influential leaders of real estate at the GRI Chairmen’s Retreat. By personal invitation only, the Retreat is a three day event that holds living-room type discussions and activities in St. Moritz, Switzerland. Between the discussions and high-level networking breaks, Holger Schmeiding, Chief Economist at Berenberg Bank, held a keynote which addressed some of the key risks currently present in the sector. Titled The World in 2020 - What could possibly go wrong?, it spoke about some of the things that may pose a risk to this year’s business. 

The biggest threat to the industry was said to be world politics and how volatile everything seemed to be on the world stage at the moment.

 
Trump’s winning of the presidency through promises of his aggressive foreign economic policy and threats of war is, to many, a personification and indication of just how volatile politics has become. And to say that he’s a controversial figure would be an understatement. Whether he’s part of the problem or not though, it’s clear that today’s world is much more socially conscious, politically minded, outspoken and argumentative. This may have positive effects on certain aspects of real estate; such as affordable homes, esg properties and impact investing, and also negative ones; for example protestors forcing Amazon to cancel the development of their second HQ in New York city because of alleged anti-humanitarian practices. 

This is just one story in the wider global situation. Aside from Brexit, threats of war, debt crises and aggressive stances against immigration are all politically motivated disruptors to the market. Of course the worst case scenario is incredibly bleak, but what the attending real estate leaders agreed was that the likely outcome was much more positive. In terms of these things affecting real estate, it was said that (hopefully) the worst was already behind us. 

 

GRI Club will be holding region-dedicated discussions on politics at their upcoming European events, such as Deutsche GRI (12 - 13 May) and British & Irish GRI (3 - 4 June).

Article by Matt Harris