Our increasingly fast-moving and complex world already makes it hard to plan ahead; the last thing any investor needs is geopolitical uncertainty and we have been afflicted with it for the past few years.

However, it seems hopeful that some of these uncertainties will be resolved before too long. The combatants in the US-China trade war have been making positive noises in recent weeks and with a US election next year the momentum to resolve the dispute amicably is strong.

This does not mean tension between the world’s superpowers has entirely dissipated, but we should expect some respite at least.

The UK has been in a rather precarious state since it voted to leave the European Union in 2016, however it seems that the forthcoming (at the time of writing) general election will resolve this and see an orderly Brexit next year.

This should bring an immediate boost to the many Asian investors who have bought in Britain in recent years and encourage further investment in its strong underlying economy. An orderly Brexit will also pour more oil on the waters of the global economy.

Looking back to last year, a major concern for real estate investors was the prospect of rising interest rates. Since then we have had three rate cuts in the US, totalling 0.75%, and cuts in Australia, Indonesia and several other Asian nations. With the exception of Japan, Asia has room to cut further, which makes real estate immediately more attractive. There may be room for more cap rate compression yet!

That compression looks likely because of the amount of capital allocated to real estate. Preqin data show $121bn of capital raised for real estate worldwide in the first three quarters of this year, putting us on track for a record. Investors are still keen on Asia Pacific: in September, Angelo Gordon raised $1.3bn for its largest ever Asia fund.

Where is this capital going to find a home? Real estate’s income element is its big draw for investors, so we should see more investment in markets with higher yields or where the yield gap between property and bonds is high. Niche sectors such as student living, self storage, data centres and senior housing – which we have examined in Prospects over the past 12 months – will prove popular going forward.

Further reading:
Savills Hong Kong Research

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Simon Smith