Global economy is undergoing tremendous transformation & the prevalent binary model, that once saw the world as developed & under-developed is becoming void. Increasingly, new epicenters of power, significance & economic prowess are emerging & tantamount to such emerging patterns, the real estate industry is also up for new changes.
Although the traditional favorites continue to consolidate a strong position, emboldened by higher economic activities & employment opportunities; increasingly new players are emerging on the global real estate landscapes, attracting both institutional & individual investors.
New Epicenters of Realty
Surging economy & constant urge to identify high yield investments is spawning new markets on the forefront. Emerging economies such as Tanzania, Vietnam, Myanmar that hitherto were relatively unknown, are amongst the new favorites of international investors.
In Asia Pacific, Vietnam on account of higher economic growth, unprecedented rates of urbanization & expanding middle class continues to attract FDI inflow into the nation’s burgeoning real estate market. In 2016, the total FDI inflow in real estate industry has been in tune USD 1.3 trillion, with luxury properties, townhouses & villas counted amongst the most sought after units. The route to investment is mostly institutional as individual international investment in Vietnam are yet to see significant uprising.
After change in governance from military run dictatorship to a democratic civilian government, Myanmar is actively emerging on the investment scenario. Its real estate industry has received a total FDI in tune of USD 3.1 billion in the 1st eleven months of 2016, 4.6% of the total FDI inflow. Its capital Yangon is expected to grow twofold & reach a population of 10 million in another 15-20 years. This will further drive international investment into its booming real estate sector.
Nairobi, often called the “London of East Africa” is banking on high volume institutional & individual investment from Asia, Africa & Middle East, that is capitalizing on its relentless pace of urbanization & a construction boom, spread over the last decade. Kenya will continue to consolidate its strong position on the global marketplace, driven by relentless growth in the times to come.
Other African markets such as Tanzania, Nigeria & Angola are also witnessing higher demands from international sphere.
Major Political Makeovers
The year passed by has also seen some of the major geopolitical realignments including, BREXIT, Trump’s election to Presidency & Chinese decision to regulate its capital outflow. Such major events would not just wield significant impact on their domestic markets but the vibrations are expected to cascade far & wide into various other parts of the globe.
USA real estate industry has been rallying ahead this year, driven by strong internal & international demand & catalyzed by continuously dwindling unemployment & expanding wage rates. Similar strong sentiments prevail in Canadian real estate markets, with property prices surging at an Y-o-Y rate of around 9.7%, defying the general sluggishness that the economy has been subject to, in the recent times.
So far London has showcased certain resilience & not-withstanding the initial jitters, its real estate market has showcased recovery. However, the future of its real estate industry still lingers in doldrum. In Europe, Germany continues to consolidate its strong position in the real estate industry with a buoyant residential & commercial real estate sector.
In Central & Eastern Europe, outsourcing boom is fueling the commercial real estate sector in Poland. Not just in Europe, but Poland is making a mark on the global outsourcing map & is touted as the 3rd largest outsourcing destination after China & India. Major Polish cities such as Krakow, Wroclaw, Tri-City, Poznan, Katowice, Lodz and Szczecin are attracting new businesses due to better cost & availability of right talent. By 2020, the total BPO jobs in Poland is expected to reach 300,000, demonstrating a 10% Y-o-Y growth.
Office market in Russia is once again moving up with a total office uptake in Moscow in tune of 45 million Sq. Ft in 2016, a rise of threefold when compared to a year before. The monumental growth in office real estate in Moscow has been ascribed to larger size of the transaction in 2016 & growing emphasis amongst companies to renegotiate deals & leverage the subdued prices.
However, economic woes & an enlarging social inequality continues to cast contingent shadows on the future of Russian residential market, as the sector suffers from sluggish demand. With economic outlook of the country no longer looking conducive for an immediate turnaround, the residential market will continue to stay subdued.
In Middle East, Dubai real estate market slowed down after rallying ahead in the recent times. However, known for its ferocious ability to reinvent & rebuild itself, the emirate is pioneering a new kind of real estate, set to attract a whole new bunch of designers, creative professionals & entrepreneurs from all around the world. The city has started the Dubai Design District (D3) that is a purpose built creative community built to cater to the needs of the thriving creative & design regional & global industry. The place, whose coordinates goes much deeper than a typical design neighborhood & offers tremendous potential for regional & international creative minds to live, conduct business, collaborate & thrive.
Increasingly, the Chinese are becoming a formidable force in global real estate industry. In the 1st nine months of 2016, the Chinese contributed around USD 18 billion of investment in global properties. However, the recent move by Chinese government to regulate capital outflow to reverse the weakening of local currencies, might have some negative impact on real estate investment scenarios. State owned enterprises in China, would not be allowed to invest over USD 1 billion in International real estate.
However, many experts believe that as most of the deal size are within USD 1 billion, the impact should be minimal. It is also believed that, Chinese investors both individual & institutional will continue to invest in US real estate (San Francisco, LA, New York). Other major markets such as Australia & Germany are expected to be on the list of Chinese radar.
In 2017, real estate investment in the global real estate is expected to move up the curve. However, it is essential that before undertaking a real estate decision, one must not just adopt a tick point approach but carefully map all the essential investment drivers before taking an investment decision. Rather than just looking out for short term returns, the real mantra should be long term capital gains.
