Global real estate is about to reach its end, according to a warning by the Grosvenor Group on Tuesday. This forecast on the global real estate was made by the major United Kingdom landlord that manages the investments of the Duke of Westminster during an annual report. The landlord noted that the long period of increasing property values may be set to reverse.
The global real estate investment rose after the financial crisis in 2008, which forced the residential and commercial property values to record highs in cities across the globe. In the midst of low interest rates, property returns appeared attractive than with other asset classes, according to a feature from the Financial Times.
Low oil prices, unpredictability in the political scene and stock-market volatility have reduced the demand, while the high-end housing markets in major cities like New York and London have weakened during the past years. In addition, the low the volumes of commercial property transaction reached a total of $1.2 trillion last year, a 2 percent drop from 2014 based on the Real Capital Analytics data.
Aside from high values of property, Grosvenor stated the risk brought by sustained low oil prices which could result in sovereign funds, reducing the investment in high-end residential and commercial property.
Grosvenor boasts its 300-acre plot of central London since 1677, surrounding the Belgravia and Mayfair neighborhoods, and a home to embassies and hedge funds. However, the value of high-end housing in these areas have dropped in the past year.
According to Grosvernor chief executive Mark Preston, the top end of London's residential market has gone past its peak because of the recent changes to the strength of sterling and stamp duty last year.
In 2015, Grosvenor reported a total return of 9 percent, down from 2014's 13.1 percent, while the pretax profit totaled £526.6 million, down from 2014's £681.8 million.
Meanwhile, Grosvenor's finance director Nicholas Scarles said that they expect the next few years to bring an improved environment for the global real estate market, although they have seen an above-the-cycle average performance every year since the financial crisis, according to a feature from The Wall Street Journal.
