GLOBAL REAL ESTATE OUTLOOK

Transcription

1 Investor introduction GLOBAL REAL ESTATE OUTLOOK February 2016 A report by

2 Introduction The January edition of Naseba s Global real estate outlook focused on tracing the emerging outline of the post-global Financial Crisis (GFC) real estate market. In our February edition, our regional snapshots will cover recent developments and emerging trends in the property markets of Asia, Europe, the Middle East, Africa and North America. The recent oil price crash continues to dominate headlines around the world, and investors in oil-producing nations have been forced to reshape their wealth management strategies in order to cope with the financial aftermath of the crash. This has largely taking the form of an increased focus on divesting from oil-dependent assets into a variety of sectors, including real estate. Economic instability in China, and the subsequent gradual but significant retreat of Chinese investors from global property markets, is also having widespread consequences for real estate stakeholders in key markets around the world, including the US and Australia. Though some analysts are predicting a possible recovery in the near term 1, others including the CBRE s Head of Research for the Americas, Spencer Levy believe that volatility in China is the new normal 2 and its economy is unlikely to stabilise soon

3 Regional snapshots Asia Over the past five years, house prices in Asia have risen in every major hub for property investment, with the exception of Vietnam, where prices have dropped percent 3. House prices in Hong Kong have seen a massive growth of 96 percent, by far outstripping the price change in any other regional property hotspot, including India. Sales in the Asian retail property market have been boosted largely due to the increased spending power of young buyers, a rapid growth in the number of middle-class families and sustained urbanisation 4. Singapore continues to dominate the field in terms of outbound capital, with Singaporeans spending more on foreign real estate than Asian investors from any other country. A concerted effort by the Singaporean government to position the nation state as a hub for technology and innovation is heavily influencing the type of development occurring within its borders, which in turn is affecting the property market. Similarly, government initiatives and legislation in other Asian countries continue to heavily impact the investment patterns and abilities of investors from the region. Chinese investors are currently subjected to state controls dictating that no individual can take more than 50,000 USD out of the country per year, which is partly behind their withdrawal from UK property markets 5. Though investors have long taken advantage of loopholes to this rule, it appears the loopholes may be closing as China s economy slows, giving the government cause to enforce the rule more severely. Asian buyers from other countries also appear to be deserting London s prime property market. Buyers from Asia were responsible for 26 percent of the sales of homes in upscale London neighbourhoods like Kensington, Chelsea and Belgravia between January and September 2014, but that number dropped to 6 percent in the same period

4 of This has been largely attributed to turbulence in China s equity markets and its effects on other emerging markets in Asia. Europe In contrast to the desertion of London s property market by Asian investors, European investors are showing a reinvigorated interest in national and regional property. In 2015, UK nationals represented 42 percent of buyers of UK property, up from 36 percent in As in any property market, local buyers are likely to be able to navigate the bureaucratic quagmire that can often be involved in property sales in nearly every sector. Regulations and tax laws can be deciphered more easily without the impediment of a language barrier, and with access to a trusted network of contacts based in the country. However, even local European buyers are facing issues with a lack of transparency in certain property investment transactions. Reports have emerged of European investors being substantially overcharged by property asset managers who fail to provide an adequate level of transparency regarding fees. These fees are connected with unlisted, open-ended property funds. Collectively, these funds account for billion EUR (134.8 billion USD) of assets in Europe. In terms of attracting the attention of foreign investors, a surprising rising star has emerged among European cities: Copenhagen, Denmark. According to the Emerging Trends in Real Estate Europe 2016 report, published by the Urban Land Institute in collaboration with PricewaterhouseCoopers, Copenhagen ranked fifth in investment prospects for this year. It followed the four most popular prospects: Berlin, Hamburg, Dublin and Madrid

5 Middle East Within the Middle East, the Saudi property market is showing significant promise despite the country being hit heavily by the oil price crash. Though the effect of the crash on the Saudi economy was not as dramatic as the effects seen in Nigeria or Venezuela, the Kingdom still posted a 100 billion USD deficit in its annual budget for However, even taking the deficit into account, Saudi Arabia has announced a budget of over 600 billion USD to be spent on future development projects, proving that the government intends to take oil price fluctuations in stride and forge ahead with existing plans to improve the country. This was highlighted by a recent JLL report showing that the economic reform being pursued by the Kingdom in the wake of the oil price crash, including structural changes and a strong push toward diversification, could ultimately prove beneficial to the real estate market. In addition to these general steps to promote economic stability, the government is also taking active steps to enhance the real estate market. The reform of the national home financing scheme is expected to benefit the over 60 percent of Saudi Arabia s population who are in or below the middle-income segment and struggle to afford housing 8. The Saudi Real Estate Development Fund (REDF) will become a bank, which will contribute to addressing issues in home financing within the Kingdom 9. Africa African property markets continue to combine the appeal of high returns with the prospect of high risk and the complications of underdeveloped infrastructure and poorly regulated investment environments. 8 ZAWYA / 9

6 The property markets of Angola, Kenya and Nigeria are experiencing remarkably rapid growth. The Nigerian real estate market in particularly appears to be thriving, with the Central Bank of Nigeria recently announcing that the Lagos real estate sector has reached a valuation of 45.6 billion USD, representing 8 percent of Nigeria s total GDP 10. In South Africa, the real estate market is being touted as one of few safe options for investors looking to dodge the admittedly slow-moving but high-impact bullet of inflation and protect their portfolio from the depreciation of the South African rand. A report by Catalyst Fund Managers found that South African listed property investments outperformed any other asset class in 2015 the seventh time that it has done so within an 11-year timespan 11. Listed property generated a return of nearly 8 percent in 2015, compared to a 6.5 percent return from cash, a 5.1 percent return from equities, and negative 3.93 percent return from bonds. In news likely to heavily impact African renters and home buyers, the African Development Bank recently announced an 8.2 million USD equity investment in Shelter Afrique, a housing and habitat company that aims to provide quality affordable housing throughout the continent. Addressing the acute shortage of affordable housing in Africa is an important step in developing a real estate market that is able to cater to every income class. North America In North America, Canadian property investors who took advantage of low US house prices following the 2008 subprime mortgage crisis to snap up prime real estate are currently making a killing in the US real estate market 12. The steep devaluation of the Canadian dollar, combined with rising house prices in the US, makes this the optimum time for Canadian buyers to sell off any real estate they may have acquired south of the border

7 The real estate in question is mainly located in Arizona and Florida. The property being sold off in the latter by Canadians might well be picked up by Middle Eastern investors, who have recently shown a great deal of interest in the Sunshine State 13. This in part due to the establishment of a direct flight between Dubai and Orlando by Emirates Airlines. The appeal of the state include not only its climate and newly enhanced accessibility for Middle Eastern investors, but also its world-renowned attractions and amusement parks, which make real estate in the surrounding neighbourhoods consistently attractive to both foreign and domestic investors. Trends to watch Logistics and industrial real estate still in demand 2016 is expected to be a good year for leasing and capital markets activity in the logistics and industrial real estate sector. According to JLL s recently released Global Logistics Sentiment Survey, demand for logistics facilities should remain fairly on a global basis in 2016 with anticipated rental growth in all global markets through to Though demand is down from 2014 and 2015 levels, JLL Director of Research for Industrial and Retail Property Markets Aaron Ahlburn believes that There is still a lot of attraction for investments in the industrial sector and a lot of large institutional investors and a lot of competition in this space. However, he also sees signs of cooling in the market, including decreased capital from corporate clients, which is needed to deploy new facilities. China s uncertain future spells uncertainty worldwide The slowdown of China s economy alternatively called a meltdown or a crisis, depending on the level of pessimism being brought to the conversation is expected to affect various housing markets around the world. These include Hong Kong, the US, Canada, Singapore and Australia. Chinese buyers spent 28.6 million USD on residential 13

8 property in the US between March 2014 and March 2015, representing 16 percent of total international transactions in the US. They have also been highly active in Canada; a 2015 study showed that in Vancouver, over 70 percent of property sales worth 2.1 million USD or more were made to Chinese buyers 14. Chinese investors have also been on recent buying sprees in Australia in the first half of 2015 alone, property deals by Chinese buyers in Australia totalled 1.8 billion USD

9 About Naseba Naseba offers business facilitation expertise in growth markets. Our services include investor introduction, industry meetings, leadership forums, and professional training. Naseba partners with governments, key figures in media, industry and academia to add real value to our network worldwide. Since inception in 2002, Naseba has connected over 80,000 executives globally through more than 700 proprietary business platforms. Naseba operates from 4 main offices in Bangalore, Chicago, Dubai and Riyadh, and local representatives in Algeria, China, Malaysia, Portugal and Spain. Naseba. Creating opportunity.