High level outline Today s tips for the Country Buy Report Stephen Malpezzi Introduction Overview of the country and economy Basic indicators (GDP, employment, etc.) Key institutions, the setting How does your country compare to other potential markets? Where in the country are you investing? What s your property type? How will you invest? Risk analysis and mitigation 2 A simple view of real estate in the economy Stage II: Employment and CRE feed back into the rest of the economy Housing Market Consumption, GDP Employment, Commercial Real Estate Housing Market Consumption, GDP Employment, Commercial Real Estate Commercial real estate is derived demand. 3 4 1
World Population 2 Urbanization and GDP Per Capita: Where does your country fit in? 5 Total GDP at Purchasing Power Parity Exchange Rates, 199 Total GDP at Purchasing Power Parity Exchange Rates, 15 Forecast 2
World population under $2/day, 2 Growth in Aggregate PPP GDP, 1975 2 Declines in PPP GDP, 1975 2 Urbanization and GDP Per Capita, 196 SGP BMU Percent Urban 9 8 7 6 5 4 EGY SYR 3 MWIBFA LSO NPL BDI PAK GHA CHN INDSLE IDN BWA MLT HKG URY ISL GBR ISR NZL ARG DNK CHL CAN USA LUX AUT VENFRA ITA NLD BHS HUN ESP BLZ CHE MEX PER ZAF BRA COL PAN NIC SLV PRY ECU CRI PHL COG DOM GTM MAR FJIDZA TUR MYS KOR ZAR SENHND THA CAF ZMB CIV LBR LKA NGA OMN ZWE CMR VCT TGO SDN BEN MDG TCD KEN BGD NER RWA PNG GAB PRI GRC IRL BRB SYC 5 135 365 984 2,657 7,174 19,371 52,32 GDP Per Capita, Constant U.S. Dollars, Log Scale 3
Percent Urban 9 8 7 6 5 4 3 Urbanization and GDP Per Capita, 197 BLZ GEO NIC EGY SYR TUN COG ECU DOMIRN DZA PRY MAR GTMFJI PHL MYS ZAR SEN ZMB GHA HND CAF CIV VCT PAK LBR SLE KIR NGA TGO IND GMB LKA CMR THA IDN SDNBEN ZWE GNB MLI MDGMRT TCD KEN LSO BGD NER SWZ PNG MWI BFA BWA NPL BDI RWA CHN COL SGP BMU MLT HKG ISR AUS ISL URY NZL ARG DNK GBR CHL CAN LUX VEN GRL DEU FRA USA ESP BHS ITAAUT NLD PRI CHE PYF GRC IRL NCL PAN ZAF LVA HUN PER MEX BRA KOR SLV TURCRI SYC JAM GAB OMN SAU BRB LIE 5 135 365 984 2,657 7,174 19,371 52,32 GDP Per Capita, Constant U.S. Dollars, Log Scale Percent Urban SGP 9 8 7 6 5 4 3 Urbanization and GDP Per Capita, 198 HKG MLT ISRGBR ISL URY BHRAUS ARG NZL DNK CHL VEN LUX GRL CAN ESP FRA BHS DEU EST BRA LVA PRI ITA AUT BGR DMA PER HUNMEX SAU NLD COL JOR CYP GRC NCL PYF SURKOR GAB IRL GEO DOM NIC TUN IRN BLZ PAN COG ZAF SYC SYR ECU JAM OMN ROM EGY DZA SLV TUR CRI MAR PRY MUSMYS ZMB BRB CIV PHL GTMFJI SEN CAF ALB HND KNA LBR CMR KIR GRD GHA ZAR SLE BEN PAK GMBNGA MRT THA VCT LCA NAM IND GIN TGO COM IDN ZWE GNB TCD CHN SDN MLI MDGLKA SWZ BGD KEN BWA MOZNER VUT PNG LSO MWI BFA NPL BDI RWA USA 5 365 2,657 19,371 GDP Per Capita, Constant U.S. Dollars, Log Scale BRN CHE BMU ARE LIE Percent Urban Urbanization and GDP Per Capita, 199 MAC SGP HKG BMU 9 MLT ISR ISL URY ARG BHR GBR AUS DNK LBN CHL VEN NZL 8 GRL BHS LUX ARE DJI CAN BRA CZE SAUESP JOR RUS KOR FRAUSA DEU CHE EST PRI 7 ARM COL LVA MEX PERSUR GAB BLRBGR DMA LTU NLD UKR HUN CYP ITA MHL OMN BRN AUT POL 6 GRC NCL MNG TUN TUR MKD IRL COG ECU IRN GEO KAZ DOM SVK PYF AZE HRV NIC DZA ROM PAN CRI ZAF IMY 5 JAM 5.3 PHL MARPRY SLV SRB MYS SVN SYR SYC BLZ LBR CPVTKM EGY MUS BWA CIV CMR HND GTM FJI 4 MRT GMB ZMBSEN UZB VCT CAF KGZ AGO GHA ALB BENNGA GNQKIR KNA SLE TJK GRD BRB 3 TGO PAK IDN GNB THA GIN LCA ZAR SDN CHN COM ZWE NAM IND FSM MLI MDG SWZ TON MOZ TCDVNM WSM BGD YEM TZA KEN VUT LAO BTNLKA LIE NER ETH BFA LSO PNG SLB MWI UGA NPL BDI RWA 5 365 2,657 19,371 GDP Per Capita, Constant U.S. Dollars, Log Scale Percent Urban Urbanization and GDP Per Capita, MAC SGP HKG BMU KWT PRI QAT URY MLT ARG ISR ISL 9 VEN BHR GBR LBN CHL AUS NZL DJI DNK LUX BHS BRA GRL 8 GAB JOR SAU KOR CAN ARE USA LBY ESP NLD CZE FRA RUS MEX COL DEU CHE WBG SUR BLR DMA OMN 7 PER BRN BGR EST PLW CYP UKR IRQ MHL LTU LVA ITA ARM PAN AUT IRN HUN MKD TUN TUR DOM MYS POL NCL 6 ECU DZA PHL COG MNE SLV CRI GRC IRL MNG KAZ ZAF HRV LBR NIC PRY SVK GEO CPV MARROM AZE SYR BWA JAM PYF IMY 5 GMB CMR SRB SYC SVN AGO FJI BLZ 46.7 MDA TKM GTM GHA CIV HND NGA KIR IDN BIH VCT ALBEGY MUS 4 MRT SEN CAF BEN GNQ SLE TGO KGZ SDN UZB HTI CHN BRB FRO ZMB PAK ZWE NAM KNA GIN ATG 3 ZAR GNB MOZ THA GRD CHI MLI COM MDG IND MDV LCA TJK YEM BTN TCD BGD TMP VNM TZALAO SWZ WSM TON VUT FSM KEN LSO ERI BFA KHM ETHMWI NER LKASLB RWA LIE NPL UGA PNG BDI 5 365 2,657 19,371 GDP Per Capita, Constant U.S. Dollars, Log Scale 4
Percent Urban 9 8 7 6 5 4 3 Urbanization and GDP Per Capita, 8 ZAR BDI SGPMAC HKG VEN URY ARG ISR ISL AUS GBR DJI CHL BHR LBN NZL DNK BRA GAB KOR NLD LUX PLW SAU CANUSA JOR MEX LBY ESP FRA SUR BLRCOL RUS DMAPAN CZE DEU CHE MHL BGR PER DOM MYS EST CYP UKR TUR AUT MKD LVA HUN ITA ECUDZA TUN LTU PHL ARM CRI COGPRY GRC CPV MNE SLV ZAF POL IRL BWA GMB CMR MNGNIC AGO KAZ MAR HRV SVK SYR ROM IDN GEO AZE FJI JAM SYC SRB BLZ GHA NGA CIV HNDTKM GTM HTI ALBBIH SVN VCT SDN KIR TGO BEN SEN MDA CHN EGY MUS CAF GNQ SLE MOZ MDV KGZ PAK UZB NAM ZMB GIN BTN MLI THA KNA GNB LAO MDG YEM GRD ATG COM IND BGD LCA TJKTCDTMP VNM TZA LSO VUT SWZ TON WSM FSM ERI KEN KHM MWI BFA NER ETH NPL RWA SLB LKA UGA PNG LBR Some questions about economic growth What are the patterns of growth across countries? Is there convergence of poor countries with rich countries, or do the rich get richer and the poor get poorer? How does the picture change when we focus on people rather than countries? Is there an emerging global middle class? 5 135 365 984 2,657 7,174 19,371 52,32 GDP Per Capita, Constant U.S. Dollars, Log Scale 18 Two World Views Neoclassical growth models: poor countries must have higher marginal product of capital. So capital will flow there. Growth rates will be higher in poor countries, and countries will converge. A more pessimistic view: the rich get richer, and the poor get poorer. Who is correct? % Average Annual Growth in Real Dollar GDP PC 15 5 GDP Per Capita Growth and Initial Conditions Growth in Real U.S. $, 199 9 Population weighted Regression Line Unweighted Regression Line 5 1,, GDP Per Capita, 199 in $ 5
21 22 Important questions for another day Is GDP (or GDP per capita) a sufficient statistic for economic development and opportunity? How do we measure GDP? Why are some countries rich, and some poor? Why are some countries growing rapidly, and others declining? 23 Sources International Monetary Fund. (Semiannual). World Economic Outlook. Malpezzi, S. (199). "Urban Housing and Financial Markets: Some International Comparisons." Urban Studies 27(6): 971 22. Malpezzi, S. (6). Cross Country Patterns of Urban Development. A Companion to Urban Economics. R Arnott and D McMillen (eds). Malden, MA, Blackwell. Malpezzi, S. (11). Urban Growth and Development at Six Scales: An Economist's View. Global Urbanization. E. L. Birch and S. M. Wachter (eds.) Philadelphia, University of Pennsylvania Press. Organization for Economic Cooperation and Development. (Semiannual). Economic Outlook. Pinkovskiy, M. and X. Sala i Martin (9). Parametric estimations of the world distribution of income, National Bureau of Economic Research. World Bank. (Annual). World Development Report. 24 6
Reading for Life Carmen Reinhart and Ken Rogoff, This Time Is Different: Eight Centuries of Financial Folly. Princeton University Press, 9. Barry Eichengreen, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System. Oxford University Press, 11. Menzie Chinn and Jeffry Frieden, Lost Decades: The Making of America's Debt Crisis and the Long Recovery. W.W. Norton, 11. Pietra Rivoli, The Travels of a T Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade. Wiley, 9. C.K. Prahalad, The Fortune at the Bottom of the Pyramid. Wharton, 5. Michael Spence, The Next Convergence: The Future of Economic Growth in a Multispeed World. Farrar, Straus and Giroux, 11. Some initial hints on data Focus on the World Development Indicators. Think about spreadsheet/database design. Database for Life, a bottom up concept. Go to http://data.worldbank.org/ Some principles of effective data presentation. China Total Population China Total Population Population Growth Rate Population Growth Rate Millions; Linear Scale 1,5 1,4 1,3 1,.35.3.25. Millions; Log Scale.35.3.25. 1,.15.15 1,.. 9.5.5 8.. 7.5.5 6.. 5.15 5.15 27 196 1962 1964 1966 1968 197 1972 1974 1976 1978 198 1982 1984 1986 1988 199 1992 1994 1996 1998 2 4 6 8 28 7
Your turn! Friday, create the equivalent population chart for your country, and the USA, using WDI, and bring it to class. NB: Whatever s on the syllabus, I ll often start my lectures with some tips/instructions on the assignment; and I ll email and post other materials. 29 8