The year ahead is going to be a difficult one for real estate investors, who are faced with political risk, economic slowdown and the end of the cycle looming, Anthony Shayle, head of Real Estate Debt EMEA, UBS Asset Management told Real Estate Day, but investing in debt offers stability and can be a solution.
‘There are many issues facing investors in 2019, many political risks in the environment and growing economic risks too,’ he said. ‘Investors, whether they are fixed income, straightforward real estate investors or asset managers, are bothered about the stability of the asset in the context of where the market is going, in a cycle that has potential interest rate increases as well as political instability.’
The UK is dealing with Brexit, many European countries have their own political issues to deal with and the tensions between the US and China with the increasing risk of a trade war are present in everyone’s mind.
‘The key issue for investors at the moment is that they look at the position of the cycle in real estate markets both in the UK and in Europe and it is very evident that, to varying degrees, the real estate markets are either close to the top of the market or at the very best late stage,’ said Shayle.
This means that returns in the real estate world could be very volatile, but there is one solution for investors who in many respects want some stability.
‘If investors want more certainty attached to their income, debt offers that,’ Shayle said. ‘It provides stable cashflow deriving from coupons or interest payments. It has stability because the capital side of the equation is dampened by rending at a loan to value rather than taking 100% of the equity risk.’
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