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Liquidity becomes next differentiator

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Focus on further downside potential has receded over the last year. As a result, the macro outlook is more balanced and the recovery expected to continue. For the first time in a long while, we can see a surprise on the upside next year. 

- Global invested stock set another new record in 2012, despite modest growth of only 1%. But, Asia Pacific was the only region to post strong growth of 8%, offsetting declines in both Europe and North America. 


- Deleveraging continued across all three regions in 2012, with equity growth close to 5% and debt unchanged. But, non-bank lending and corporate bond issuance continued their growth, while bank lending remained flat. 


Property market sentiment remains mixed, despite the improving macro outlook. Lenders are more cautious than investors in our annual survey. While still selective, more lenders expect growth. Investors feel buying opportunities remain have returned to normal and that debt availability has improved. In our view, sentiment has been slow to improve due to the debt-related workout, especially in Europe. But, things are not as bad as they seem, considering: 

- Global investment volumes were up 4% in 2012. Strong 15% growth in North America offset declines in both Asia Pacific and Europe. Cross-border volumes also improved and have now returned to their 2005 level. 


- More than two thirds of markets are classified as very attractive, with less than 10% as unattractive. In fact, relative value is at its best level in eight years, due to lower bond yields and a better growth outlook. 


- Total liquidity has returned to near its 10-year average, with North America ranking top. However, based on inter-regional liquidity Europe is most attractive for new investors. With relative value now less of a differentiating factor, we think investors should consider liquidity and size more closely.


Source : DTZ (Groupe UGL)

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