Global real estate transactions hit record $600 billion
Wednesday, 25 July 2007
US, Australian and Middle Eastern investors were the most prominent private capital investors into the global real estate market in 2006, whose emergence as a mainstream global asset class was further confirmed.
According the latest report by UK-based international property consultants DTZ titled "Money into Property", estimated global real estate transactions hit a record high of $600 billion in 2006 — up 25 percent on 2005 and a staggering 150 percent on 2004.
However, despite the perceived buoyancy of the real estate market in the Gulf Cooperation Council (GCC) states such as Dubai with its mega projects and the emergence of Islamic real estate financing, the US by far accounted for the majority of global investment in real estate, followed way back by the UK. Together these countries accounted for 70 percent of the global investment in real estate in 2006.
Transactions, according to the report, continued to be driven by a "wall of money", targeting real estate assets. DTZ estimates that global capital flows associated with real estate investments totaled $860 billion in 2006 — up 5 percent on 2005 and 40 percent on 2004. This resulted in a total real estate capital market of some $9.63 billion in 2006.
"Private capital, as in 2005, remained the prime driver behind the growth, with US, Australian and Middle Eastern investors prominent. However, the public market also expanded substantially, driven by debt securitization and, particularly in the Asia Pacific region, and real estate investment trusts (REITS)," said the property consultancy.
The global economic and financial environment has in recent years been characterized by strong growth, low inflation and historically low interest rates. Many Asian markets such as China are still on course for double digit GDP growth; others such as India, Malaysia and the GCC countries are experiencing growth rates ranging from 5 percent to 8 percent. These compared to the industrialized economies with growth rates between 1 percent to 3.5 percent.
This buoyant economic and financial climate was further boosted by the ready availability of credit and a build up of liquidity in the financial system, a prime factor behind the general buoyancy of asset markets in recent years, whether equity, bond, commodity or property related.
This ample liquidity and low interest rates have underpinned leveraged investors and at the same time encouraged a "search for yield" to boost returns — whether in real estate transactions, or emerging alternative assets classes such as hedge funds, structured debt or high-yield bonds.
However, another trend is for investors seeking high risk high reward investments, to increasingly invest in "secondary cities" or in less established emerging markets such as Central and Eastern Europe, India and China. There is also increasing investor activity in alternative property assets such as nursing homes, student accommodation, multifamily developments, warehouse distribution facilities and self-storage facilities.
Arcapita Bank in Bahrain, for instance, is one of the first banks in the region to invest in multifamily developments in the US and in self-storage and warehouse distribution facilities in the UK and European Union. Arcapita Bank, for instance, is a large equity holder in Shurgard, the self-storage business in the UK and EU. The bank also has a $1.5 billion US Islamic real estate investment portfolio.
Airports, power stations, bridges and toll roads are also in the sight of investors in private public finance initiatives, which is set to increasingly grow in global markets.
All this investment in real estate, says DTZ, has not only driven up total returns via yield compression, "but also appears to have created a 'virtuous circle' whereby increased investor demand for property assets has stimulated market innovation and product development, resulting in substantial improvements in market access, liquidity and transparency. This has arguably reduced underlying risk premia attached to real estate assets".
Is this interest in real estate investments sustainable? A DTZ investor intentions survey suggest that investors are generally seeking to increase their exposure to real estate in 2007, with a greater appetite for development projects and continued strong institutional demand for indirect access to the market. In the short-term this buoyancy will be maintained, but the investment environment, warns DTZ, will be more challenging in the year ahead than has been the case over recent years. "We do not expect a 'hard landing' for the world economy. Although the US economy is slowing, any sharp correction should be confined to the residential housing market, whilst firmer growth in Europe should provide some offset".
The UK real estate market had another record year in 2006 with total transaction volume exceeding 50 billion sterling pounds. Of this Middle Eastinvestors, accounted for 1.42 billion pounds. The West End of London, in particular, has benefited from investments from wealthy Middle East investors and financial institutions, who, according to DTZ, are typically equity buyers and are often willing to accept lower yields, looking primarily for wealth protection from their property investments.
....................
Google News
According the latest report by UK-based international property consultants DTZ titled "Money into Property", estimated global real estate transactions hit a record high of $600 billion in 2006 — up 25 percent on 2005 and a staggering 150 percent on 2004.
However, despite the perceived buoyancy of the real estate market in the Gulf Cooperation Council (GCC) states such as Dubai with its mega projects and the emergence of Islamic real estate financing, the US by far accounted for the majority of global investment in real estate, followed way back by the UK. Together these countries accounted for 70 percent of the global investment in real estate in 2006.
Transactions, according to the report, continued to be driven by a "wall of money", targeting real estate assets. DTZ estimates that global capital flows associated with real estate investments totaled $860 billion in 2006 — up 5 percent on 2005 and 40 percent on 2004. This resulted in a total real estate capital market of some $9.63 billion in 2006.
"Private capital, as in 2005, remained the prime driver behind the growth, with US, Australian and Middle Eastern investors prominent. However, the public market also expanded substantially, driven by debt securitization and, particularly in the Asia Pacific region, and real estate investment trusts (REITS)," said the property consultancy.
The global economic and financial environment has in recent years been characterized by strong growth, low inflation and historically low interest rates. Many Asian markets such as China are still on course for double digit GDP growth; others such as India, Malaysia and the GCC countries are experiencing growth rates ranging from 5 percent to 8 percent. These compared to the industrialized economies with growth rates between 1 percent to 3.5 percent.
This buoyant economic and financial climate was further boosted by the ready availability of credit and a build up of liquidity in the financial system, a prime factor behind the general buoyancy of asset markets in recent years, whether equity, bond, commodity or property related.
This ample liquidity and low interest rates have underpinned leveraged investors and at the same time encouraged a "search for yield" to boost returns — whether in real estate transactions, or emerging alternative assets classes such as hedge funds, structured debt or high-yield bonds.
However, another trend is for investors seeking high risk high reward investments, to increasingly invest in "secondary cities" or in less established emerging markets such as Central and Eastern Europe, India and China. There is also increasing investor activity in alternative property assets such as nursing homes, student accommodation, multifamily developments, warehouse distribution facilities and self-storage facilities.
Arcapita Bank in Bahrain, for instance, is one of the first banks in the region to invest in multifamily developments in the US and in self-storage and warehouse distribution facilities in the UK and European Union. Arcapita Bank, for instance, is a large equity holder in Shurgard, the self-storage business in the UK and EU. The bank also has a $1.5 billion US Islamic real estate investment portfolio.
Airports, power stations, bridges and toll roads are also in the sight of investors in private public finance initiatives, which is set to increasingly grow in global markets.
All this investment in real estate, says DTZ, has not only driven up total returns via yield compression, "but also appears to have created a 'virtuous circle' whereby increased investor demand for property assets has stimulated market innovation and product development, resulting in substantial improvements in market access, liquidity and transparency. This has arguably reduced underlying risk premia attached to real estate assets".
Is this interest in real estate investments sustainable? A DTZ investor intentions survey suggest that investors are generally seeking to increase their exposure to real estate in 2007, with a greater appetite for development projects and continued strong institutional demand for indirect access to the market. In the short-term this buoyancy will be maintained, but the investment environment, warns DTZ, will be more challenging in the year ahead than has been the case over recent years. "We do not expect a 'hard landing' for the world economy. Although the US economy is slowing, any sharp correction should be confined to the residential housing market, whilst firmer growth in Europe should provide some offset".
The UK real estate market had another record year in 2006 with total transaction volume exceeding 50 billion sterling pounds. Of this Middle Eastinvestors, accounted for 1.42 billion pounds. The West End of London, in particular, has benefited from investments from wealthy Middle East investors and financial institutions, who, according to DTZ, are typically equity buyers and are often willing to accept lower yields, looking primarily for wealth protection from their property investments.
....................
Google News