Americas Watch - April 2018
The current situation for the U.S. consumer is generally upbeat. Unemployment is at cyclical lows, the housing market continues to advance, consumer confidence rests near all-time highs and many households will get a tax break this year. The Fed, led by new Fed Chair Jerome Powell, felt confident enough to raise rates in March. However, it would be remiss not to mention recent volatility in the stock market, largely driven by escalating trade rhetoric and a potential backlash against major tech firms, that has injected some uncertainty into the picture. While the tariffs put in place to date by the U.S. and China look set to have moderate impacts on the global economy, the current situation is tenuous and could spiral further. A full-blown trade war risks being a trigger for the next recession. Up until this point, President Trump has mostly been lauded as pro-business. Given recent developments, as well as the recent departure of several key staff members and their replacement with more hardline figures, one wonders if the U.S. may face an inflection point. At best, the outlook has become much cloudier since the start of the year.
Europe Watch -April 2018
This month saw the UK hit by the “Beast from the East,” a cold wave of air stemming from Siberia, which swept across Europe bringing unseasonably low temperatures and widespread heavy snowfall. While the weather was frosty, the Brexit negotiations thawed a little. Another small step on the long road to Brexit was achieved, as a transitional agreement was reached in which current trade arrangements will be fixed until the end of 2020. However, we will continue to hear the expression “nothing is agreed until everything is agreed” as the full withdrawal agreement is yet to be finalised. The main obstacle to this remains avoiding the need for a hard border between Northern Ireland and the Republic of Ireland, to which there is still no obvious solution. Despite this uncertainty, the UK economy continues on its path of steady, if unremarkable, growth. The resilience of the wider economy is supporting occupier demand and investor confidence, although there are large sectoral differences. The negative news flow regarding retail has resumed in earnest after a Christmas period that proved less disastrous than feared. At the other end of the spectrum, industrial property is benefitting from a manufacturing sector that is in very good health.
Asia Pacific Watch - April 2018
Hong Kong saw its largest ever investment volume of standing real estate assets in 2017, and it was ranked first among all cities in APAC and seventh globally on this measure. The transaction volume of its development sites also hit a new high with over US$ 21.3 billion in sales. It also has the distinction of being the world’s most expensive market on a price per area basis, and its property exhibits among the world’s lowest yields. Certainly it is among the world’s most crowded places with around 6,350 inhabitants per square kilometer. Its 7.4 million residents also welcomed over 58.4 million tourists/visitors last year who added to this density and demand. Thus the supply-constrained commercial and residential real estate stock of Hong Kong is under constant pressure to rebuild, retrofit and redevelop on land which is often rezoned, remediated or reclaimed. GDP per capita in Hong Kong is over US$ 61,000 and is surpassed only by nine countries in the world, seven of which have smaller populations. Enjoying a recently announced HK$ 46.6 billion (US$ 5.9 billion) budget surplus, in large part thanks to land sales and the real estate stamp duty, this wealthy city has nonetheless slumped to 71st globally in Mercer’s annual quality of life survey. Balancing growth and enhancing quality of life while increasing interest rates to maintain its currency peg with the U.S. will likely be the greatest policy challenges in the next few years.
Combined Watch Link