It is halfway through 2016 & with resurgence in most of the global economies & changes in macroeconomic fundamentals, it Appears-Optimism is once again back in the real estate investor & buyer fraternity. Global Real Estate, that is often causally intertwined with changing economic & geo-political dynamics, is also witnessing new investment patterns & trends emerging on its horizon.
Slowdown in major economies like China & Russia is actively stimulating the international capital flow, with rich HNIs in these countries scouting for safe & stable offshore locations to hedge against weaker domestic economies. In general markets like Canada, USA, Sweden, Spain, Australia etc. are leading the pack in terms of attracting international investments.
Interestingly, the breath of participation is seen across multiple categories comprising of residential, commercial & retail along with various other industrial categories.
MARKET TRENDS
In USA, markets like New York, Los Angles, San Francisco along with other tourist destinations such as Miami & Las Vegas are demonstrating growth.
In Europe, London still remains a favorite among international investors, although the proposed voting on 23rd June on whether Britain will be part of EU or not has started affecting the attractiveness of London’s realty markets- Mostly visible in terms of slowdown in transaction volume with prices remaining stable.
On other hand Spain is demonstrating positivity in the market. On the backdrop of undervalued properties & a large expatriate base, there has been a rise of foreign interest in the country’s properties. Sweden continues to showcase an aggressively appreciating market, driven by robust economic growth, limited supply & low interest rates.
Emerging economies in Africa such as Kenya & South Africa are attracting investment. Though the later has shrink by over 1% in the 1st quarter of 2016, real estate has been one of the key performers.
In Dubai prices are in correction phase with similar sentiments expected to continue for some more time.
In Latin America, due to plummeting commodity prices, economic sentiments have moderated in most of the nations, which is further augmented due to squeezing mortgage market & political uncertainties in some of the countries. However, international analysts are betting on the realty market of Latin America due to its defensive investment approach involving higher anticipated yield across larger time frames.
Brazil on the backdrop of a slowing economy & political uncertainty has underwent massive correction in tune of 15-20% in 2015. However, slump in prices are now enticing investors especially of international origin to look into the market in search of good bargains, especially in the residential & hospitality segments.
Mexico & other Andean nations such as Peru, Colombia & Ecuador have been clocking moderately higher growth in the recent times. Better growth is expected to translate into stronger real estate industry, which should further get a boost from large domestic demand in the low & mid income residential segment.
In Asia Pacific, Singapore continues with a slowing market. The sentiments had further hampered due to rise in registration fee to around 15% for foreign buyers.
After the change in government & lifting of economic sanctions, Myanmar is expected to clock an average GDP growth of over 8% annually during 2016 & 17.
Growth prospect coupled with the prospect of an untapped market is attracting real estate companies from Singapore, Vietnam & USA to set their base in Myanmar. Investments are pouring into various sectors consisting of residential, office & industrials etc. Driven by surge in GDP & FDI, Vietnam’s real estate industry is also showcasing both vertical & horizontal growth manifested in terms of surge in transaction as well as capital appreciation. India continues with a bottoming out market with growth seen more in the peripheral locations.
RISE IN INSTitUTIONAL INVESTMENT
Private Equities, Hedge Funds & Pension funds Back in Real Estate, further driven by the volatility in the equity markets & inadequate bond yields. According to a survey conducted by JP Morgan on 155 individual investors, over two-third of the institutional investors are planning to increase their real estate investment in the next five years.
Along with developed quarters, in emerging markets like South Asia & Africa there has been surge in institutional investment. For instance, Emerging market investor antics have introduced new Africa focused fund primarily targeting retail, commercial & Industrial spaces in Sub-Saharan countries valuing over USD 550 million. This will be Antics 3rd Africa focused fund. In India, roughly USD 450 million has been invested consisting of around 26 individual deals.
THE RISE IN NEW TECHNOLOGIES
Technology is also playing a significant role in every aspect of the industry. Mobile apps, internet & various other technologies such as 3-D animations & virtual realities are embarking a theoretical advancement in the real estate industry. Al though it will still take some more time before the new changes will be fully realized, the winds of changes have started.
New process & product innovations are setting up across the various verticals of the real estate value chain from property listing to showcasing products to brokerage space. New startups are increasingly focusing on the consumer centric innovation & demand aggregation. For instance, the Houston Association of Realtor (HAR) have recently introduced a new app that can enable users search for properties with the help of commute time.
CHALLENGING AREAS
There are also challenging areas, that can impact the growth of real estate. Due to crisis in China, Steel prices are expected to increase in the coming time. Rise in steel prices can have negative impact on the real estate dynamics across the globe.
Across the globe, banks are becoming conservative with their dissemination of loans. As a consequence, a large number of discerning buyers find themselves off the threshold. Similar to Banks, Governments are also tightening their belt to impose stricter regulatory frameworks. From Singapore to India to USA, there has been stricter rules in the form of higher registration fee, newer condition for developers & agents along with stricter penalties in case of non-adherence.
All these regulations will go a long way in safeguarding investor interest & nurture more transparency into the system, but the fact cannot be discounted that in the shorter run, it will entail some negative impact.
