Egypt and whatever happens in the rest of the Middle East with other governments falling, matters a lot to all real estate owners and investors in the US. First is the incredible uncertainty of where all of this is going. Nobody knows yet. It could be good if there is an orderly transition to democratic governments and economic opportunity, and maybe the Iranian people rise up again and finally overthrow that regime. Bad if the Islamists get control of Egypt, Yemen or Jordan. What if Saudi Arabia falls. This is one of those truly historic moments in world history when everything is going to change and these changes will affect us for the next fifty years. We are truly at the end of an era which began after World War II with the monarchs controlling the Arab countries and crushing education and economic opportunity for all.
For US real estate here are some of the issues. Uncertainty does not bode well for investment generally, until the future is somewhat more clear. There are tens of billions of dollars from the Mideast that is moving out rapidly, even more than it has, and that money needs to go somewhere. US real estate, and especially trophy assets in major urban locations is as good a choice as any now. It is likely that some material amount of that flight capital will come here. Very high end residential in New York, Washington and similar locations will have increased demand as the princes and others flee here and London. The stock markets of the world are likely to suffer for awhile until the situation becomes more clear and then they will recover only if it appears the Iranian fundamentalists do not get control. If stock markets crack badly that is less inducement for investors to do anything other than Treasuries. Oil prices will stay high for sometime-operating costs will spike. Worst case there could be oil disruptions, although that is unlikely. If the Iranians rise up and finally succeed in overthrowing the mullahs, then a whole bright new world opens up.
Egypt is one of those overwhelming black swan events we all have wondered about, and this is a whole flock of them. Tunisia, Lebanon, Egypt, and now maybe Jordan, Yemen, and even Libya. This could be as disruptive as Lehman depending on how it unfolds. The old dictatorial regimes of the Mideast are coming to an end. A completely new era in the area is dawning. Social media and the internet changed everything. The pressures have been building for several decades, but now the young and the middle classes are able to see what they have endured and what is possible in the western world and they want their share. The Internet is the great equalizer in that it provides access to information never before possible. For the autocratic regimes of the area information is the spark that ignites the unrest and large numbers of young educated people will not be denied in this era of the internet. Bush was roundly criticized for his policy of bringing democracy to the region, but in the end he was spot on. The last of the old time post war monarchies are over.
I have no more idea where it goes from here than anyone else, but my hope and belief is many of these countries harbor large numbers of people who are not radical Islamists and who want freedom, and not monarchs replaced by mullahs. I believe this may turn out to be a really major good turn of events after a period of chaos and massive lack of clarity for several months as this all plays out. (credit j. ross, globe st)