In a joint statement chief executive Emmanuel Lumineau and chief information officer Thomas Schneider said real estate should be ‘emancipated’ from sovereign debt ratings because real estate data is supplied by private initiatives and represents a niche portion of the world’s markets.
Property markets should have their own investment risk ratings rather than being tied to sovereign risk according to global financial marketplace BrickVest.
In a joint statement chief executive Emmanuel Lumineau and chief information officer Thomas Schneider said real estate should be ‘emancipated’ from sovereign debt ratings because real estate data is supplied by private initiatives and represents a niche portion of the world’s markets.
The BrickVest pair wrote: “there is currently no structured, precise evaluation of political risk as it applies to real estate assets.
“This is hardly surprising, since it would involve considerable data collection from real estate markets in terms of demand (transactions, average square footage, rise and fall of rental rates), supply (rate of vacancy and unoccupied stock) and investment (volatility, ROI for real estate transactions).
“Establishing a tool dedicated to the political risk premium for real estate also requires access to data in real time, as well as demanding that information from different countries be normalised.”
In the UK the Brexit vote caused its debt rating to fall from AAA to AA from both Fitch and Standard & Poors ratings agencies.
But Lumineau and Schneider added: “The UK possesses one of a very few highly transparent real estate markets in the world, along with that of the US.
“Data collection initiatives, which are conducted by the Investment Property Databank (IPD), have been underway since 1986. In this respect the German and French markets remain murkier and data is harder to come by – something that is largely due to a lack of committed resources.”
They said: “Since the 23 of June it has become impossible to consider the Western European market as an integrated whole.
“As such, as we finished a year of significant turmoil across Europe, and indeed the rest of the world, with more likely to follow over the next 12 months, it is about time that the available data was aggregated to evaluate the political risks associated with real estate investments worldwide, emancipating them from sovereign debt ratings.
“There is no doubt that such a risk indicator would prove extremely valuable both in terms of yields and for regulation. Data remains the golden goose of the digital economy, an environment that real estate investment is embedded in today.”
