Anyone can play guitar

Punk playing guitar.Allright, it is official now: real estate markets have been bottoming out. Few of them are on the uprise, many are to follow shortly.

Just take a look at a few headlines of the past couple of weeks:


 Speed of decline in property returns slows, says JLL

Time for investments is approaching, says King Sturge

Ross Goobey Memorial lecture hears of ‘green shoots’

F&C is launching an opportunity fund to take advantage of the repricing in the UK

Office property lettings are leading the way, according to Property Wire, also stating:

Euro commercial property transactions increase amid signs of optimism

Yields harden for the first time since the start of 2007

Are we out of the woods yet? If we are to believe investment agents and some market analysts, we are. But why should we be? Optimism is good alright, but it should be backed by some solid market evidence. That is still lacking, I think.

Consumer spending remains low, due to layoffs, deleveraging and economic uncertainty in general. As a result, occupier demand is still very low in most markets. Many businesses are (still) suffering. This puts pressure on rental values, hence on property values. Values which have been hit by yield shift earlier. I’ve discussed this second hit before. Most investorers don’t appreciate to swallow such losses and as long as they find banks on their sides who accept them breaking coventants (or don’t know what to do with the underlying assets…) real estate assets are not likely to be sold.

The major concern remains: financing. Although DTZ reports some growing confidence (report in Dutch) of property financiers, the confidence of real estate banks still remains low. Also, let’s be honest, we haven’t seen too many big transactions taking place this year. Nevertheless, rumours are that there are a few transactions in the pipeline, that may give the market some renewed confidence in the second half of this year. If these come about, in volumes and against promising yields, markets may indeed recover in due course.

Meanwhile: opportunities galore for all property investors wishing to cash in on in longer run. Prices are around their lows now. Awareness is key, now more than ever. You will have to do your homework, look at bricks & mortar again, assess the quality of the rental income and appreciate any upside you may encounter. Anyone can play guitar. But not everyone is a rock star…