The Year of Living Dangerously

Our luncheon guest speaker for January 20, 2011 was Walter Boettcher, Colliers International. The year 2010 was better than most had forecast. However, he said there are a number of downside risks for 2011 –

• Inflation - Is it the wrong type? Main headline inflation is being caused by oil, food and commodities as a result of demand from emerging markets, and this is forecast to continue.

• Eurozone Collapse – sovereign defaults and the possibility of a country going bust.

• Currency Wars – ongoing tension with China, the US and the rest of the world.

• Food Risks – risk of reduced production and continued increase in demand from population growth.

• Natural Disasters

UK Property Market -

There was a big bounceback in values in 2010. UK was perceived to be cheap internationally because of the big correction and the weakness of Sterling. Foreign investors will continue to drive the market forward for the best assets – almost becoming ‘forced buyers’ as UK is considered to have ‘safe haven’ status with a lot of investors and known to be liquid and transparent.

Secondary assets are vulnerable to a potential pricing readjustment, especially if the banks ‘open the floodgates’ of putting distressed properties on the market. For NAMA there was no real focus yet. However, Lloyds and RBS were moving forward as they now have the teams in place.

The HOT sectors were Central London and Supermarkets. The Not So Hot sectors were secondary Industrials. Walter’s Hot tip was ‘sell secondary industrial with short income now, because people are over paying for it’.

The concerns over property and inflation were making people question if property was truly a hedge against inflation. Do equities actually provide a better bet?

Asset management in 2011 will be the main factor that will drive property performance.

Total return forecasts	2011	2012
Colliers:	7.5% pa	10.6% pa
Derivatives implied return:	4.5% pa	2.5% pa

Respectfully submitted,

Shailendra Shah