EUROPE - The UK should not expect German institutional investors to kick-start its underfunded residential market, even if the country's investors are more accustomed to housing as an asset class, a former chief executive of AXA has said.
Speaking at the St Bride's annual seminar in London yesterday, Eberhard Walz - who in the past has worked in Germany for Allianz, insurance company R+V and AXA's real estate departments - said his compatriots were now very comfortable with the London property market, having entered it more than two decades ago.
Asked if they would consider properties outside prime locations such as Mayfair, he pointed to Deka's £97m (€115m) acquisition of Pier Walk in Greenwich Peninsula two years ago as an example that investors had already.
Walz added that German institutionals were also very comfortable with residential property, as well as infrastructure, and had holdings not just in their own country but across Europe.
However, he cautioned against the UK perceiving German investment as the solution to a significant shortfall in the country's housing.
"They won't be the knights in armour," he said. "I can well imagine if you can offer an income yield of 4-5%, they will really intensively look at it. But you know, the Germans don't believe in growth."
The debate on residential exposure was started when Robert Houston, principal of St Bride's and former chief executive of ING Real Estate Investment Management, discussed the imminent change to IPD's benchmarks that would see the residential measure accounted for in its all-property index.
"Every year, at every quarter, when the pension fund or investment manager compares his benchmark against IPD, they will have to have an answer to why they have or have not got any exposure to residential," he told attendees.
Keynote speaker Ken Livingstone, a former London mayor, highlighted the importance of housing developments in the UK capital at a time when growth predictions had the population rising by more than 1m to 9m by 2030.
He proposed a scheme similar to a pilot conducted by the £11bn Greater Manchester local authority pension fund that saw council-owned land put forward for housing development, with the scheme funding part of the construction.
"There are literally hectares and hectares of land owned by the mayor and other public bodies," he said. "If you take out the land cost, that's 60% of the cost of building homes."
Livingstone said the local authority funds should develop housing projects and that brownfield sites near the Olympic Park in London's east already had infrastructure in place, ready for development, following recent projects ahead of the sports event.
He said the brownfield was the "legacy" of the Olympics, as it was flanked on either side by stations to the currently under-construction Crossrail rail line.
Critical of both the current government and former parliaments, he said: "All of this is achievable, if we get government to think long term."