As the world’s investors have learned to live with a higher degree of risk stemming from political uncertainty, real estate has taken on a new role in investment portfolios, becoming increasingly popular as an income-producing asset.
Last year levels of global trading in real estate demonstrated that investors recognise property as a safe haven for capital in the face of geopolitical uncertainty. Our figures show nearly US$770 billion was invested in real estate around the world, 25 per cent ahead of the 10-year average.
Global real estate transaction volumes grew by almost 300 per cent in the seven years from 2009, peaking in the first quarter of 2016. This near-recording breaking level cushioned the 12 per cent slowdown on 2016's total figures, compared to 2015, which can be attributed to the election of Donald Trump as president in the US and ongoing political changes in Europe.
The greatest slowdown in 2016 was accounted in EMEA markets with 21 per cent less traded in US dollar terms than the previous year. Within this, investment into the UK fell by 38 per cent in 2016. Conversely, however, Q1 2017 was the strongest ever first quarter in terms of investment volume in London (£4.34 billion) as the city demonstrated its resilience as a world leading investment market – and the attraction of cheap sterling lures buyers.
While overall trading volumes have moved away from the record levels set in 2015, the greatest shift we have seen is to do with who is shopping where. The recent influx, following Brexit, of Asian investors into London and other key global cities is an example of the changing tides. Arguably, it’s this change that has been the greatest consequence of recent geopolitical events in global real estate trading.
It remains to be seen whether this is a permanent change, but overall conditions mean we foresee global trading volumes stabilising at just over their longer term average levels for the next two years before seeing a slight uptick in 2019 and increasing at a solid rate thereafter.
Global real estate investment over last decade