Thursday 03 January 2019
Once again, the chapters of this book will provide property investors with straightforward legal guidance from each local country counsel concerning the law and customary practices of various jurisdictions with respect to the acquisition, sale, ownership, development, leasing and financing of property cross-border. There are, however, recurring incidents, developments and conditions that occur within the sector that may adversely affect properties in the market. Property markets can be in equilibrium with strong apparent real estate fundamentals; but then too much capital, persistent historically low interest rates, overbuilding, excessive leverage or gearing, unsustainable property values and ever-declining capitalisation rates have caused booming real estate property markets to crash in the past. Yet all of those are unquestionably internal factors that are endogenous to local property and national capital markets. Hence, the inevitable boom and bust journey seems to be a natural lifecycle of property markets generally.
As we have discussed in prior Global Overviews, disruption can be caused by known or unknown exogenous events or conditions developing over time. 31 December 2021 may be such a date in global financial and, therefore, global real estate markets, as the world’s most important benchmark reference rate is scheduled to end its long run as the global reference rate. Unquestionably, the London Inter-Bank Offered Rate (Libor) is an integral part of nearly every type of financial product available in financial markets worldwide, from relatively simple consumer products to the most complex and sophisticated structured commercial products and derivatives in the capital markets. Libor is the rate that contributor banks in London offer each other for inter-bank deposits (ie, funds loaned to them). Despite being tainted by the recent manipulation scandal – after an investigation in 2012 of an industry-wide scandal involving the manipulation or ‘fixing’ of Libor by a few contributor panel banks, the UK Financial Control Authority (FCA) assumed oversight over Libor in 2013, and in 2014 appointed the Intercontinental Exchange Benchmark Administration (IBA) in London to administer and publish Libor – the financial industry until recently generally believed that Libor should be reformed to continue as the global pricing benchmark in all five of its current iterations: US dollar, UK sterling, euro, Swiss franc and Japanese yen, all of which are quoted in seven different tenors or maturities: one-day, seven-day, one-month, two-month, three-month, six-month and one-year.