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Sentiment among UK commercial property investors towards the US has risen dramatically over the past 12 months as enthusiasm for their home market as well as Germany continues to cool, according to BrickVest’s latest commercial property investment barometer.

Data from BrickVest’s UK investors shows a 24% year-on-year increase in sentiment from Q4 2017 to Q4 2018 towards US real estate. The UK, however, fell 8% in the last quarter alone, fuelled by continued Brexit uncertainty while Germany dropped by 5% year-on-year.

The US (18%) is now the third most popular real estate investment destination among British investors, just behind second placed Germany (19%) and the UK, which remains the dominant market (43%) despite Brexit turmoil.

BrickVest: investor risk appetite is plummeting

As fear of a turn in the cycle mounts, the barometer shows that investors’ risk appetite has plummeted over the past 12 months away from high risk strategies (down by 23%) such as speculative development in favour of moderate risk schemes (up 26%). Well over half (56%) of real estate investors now favour moderate risk strategies, the highest level since 2016.

However, capital growth and income remain the two key drivers behind UK real estate investors, reaching 48% and 39% in the last quarter.

Emmanuel Lumnieau, CEO at BrickVest, said: “Facing stormier waters both at home and in mainland Europe, UK-based investors are increasingly looking toward US for viable investment options in order to diversify their portfolios and protect their investments. As the economic outlook for the US remaining positive for 2019 we can expect their exposure to rise.

Lumnieau said that with many investors feeling that the market is coming off a peak, it’s no surprise that support for high risk strategies has fallen so spectacularly in favour of moderate risk opportunities, which still offer attractive returns but with more downside protection.

The Armchair Trader says:

The Brickvest data is born out by anecdotal evidence from fund managers and investors who have exposure to high end residential property in the south-east of England. According to conversations with The Armchair Trader, this market has fallen off the proverbial cliff since the Brexit vote, with many overseas investors now looking at other European markets, like the Netherlands and Germany.

At an event attended by the Armchair Trader in September, one Saudi investors with a considerable existing portfolio of UK investments said he would not now be looking at any UK opportunities until the political situation in the UK was resolved. More adventurous investors are, however, still looking at UK investment if it is looking cheap from a foreign currency perspective.

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Stuart Fieldhouse

Stuart Fieldhouse has spent over 20 years in journalism and financial communications, including six years as a wealth management correspondent for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong.

Stuart has worked as head of content at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Stuart continues to work with hedge funds, private banks, stock exchanges and other financial institutions on their communications, data and marketing requirements.

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