The future of global real estate is changing

28 December 2017

We asked our experts to tell us what they think the future holds for the global real- estate market.

Jeremy Bates Head of Occupier Services, Savills believed there are factors impacting the property market that need to be addressed. “The ‘digital revolution’ disrupts and creates new opportunities for global real estate. Global markets untapped a decade ago are growing at phenomenal rates, and traditional ‘bricks and mortar’ real estate, with secure, long-term income streams, is evolving fast. Social behaviours are also changing. But important global issues, such as the scarcity of natural resources and sustainability, are being overlooked in many parts of the world, often due to political instability. These factors will have a greater impact on global property markets in the future,” said Bates.

Taking a neutral position, Richard Florida Editor-at-large of The Atlantic’s CityLab said “The future is both rosy and not. While the opportunities have never been greater, the downside is that the real-estate community has become overly enthusiastic about building luxury cities. But the real opportunity will lie in how we build affordable cities for everyone. Real estate needs to start leading on ‘inclusive prosperity’.”

Meanwhile, Akhil Patel Director of Ascendant Strategy and Editor of Cycles, Trends and Forecasts investment newsletter was bullish when discussing the future of real estate market. “I think the next 10 years might possibly involve the biggest real-estate boom we’ve ever seen. For the first time in history, we have centres of growth all over the globe, flush with capital and driven by enormous ambition. A huge amount will be invested in infrastructure globally, and this will be very beneficial for property prices,” said Patel.

One on- going trend that has been observed by Savills lately is the globalisation of real estate market. Rasheed Hassan Head of Cross Border Investment, Savills said: “Capital markets have now globalised and real-estate pricing has converged in top global cities to an unprecedented extent. Ten years ago, buyers were more focused on local property cycles, but now they look at global comparisons. A Hong Kong investor buying an office building in London, for example, will be referencing the price in their home country and considering whether value is better in Munich, Paris, Sydney or New York. This will increasingly challenge domestic investors, who will need to come to terms with global pricing metrics.” Simon Smith Senior Director, Research & Consultancy, Savills Asia Pacific emphasised on the role of Asia Pacific markets in the globalisation movement. “The world is still learning how to respond to increasingly large capital outflows from Asia Pacific, particularly China. We think they will increase over the next decade and significantly impact many world real-estate markets and asset classes,” said Smith.

Another trend to note is opportunities created by new economic powerhouses in the next decade. Linda Yueh Fellow in Economics at Oxford University said: “The future looks bright – in large part because of the increasing middle class in emerging economies around the world, who more than ever before will need housing and offices.” Troy Griffiths Deputy MD and Head of Research, Savills Vietnam, though agreed, took a more cautious perspective: “Newly affluent countries with growing middle classes, such as Vietnam, present new opportunities as land markets open up. These need to be combined with infrastructure like transport, because higher household incomes are leading to higher car ownership and pressure on roads in cities such as Ho Chi Minh City and Hanoi. Socialised funds for public transport are being eyed up as potential solutions in South East Asia, and new metro lines have the potential to open up new transit-oriented development.”

Technology has always had a large influence on the global real estate market and will continue to do so in the next decade. How? Steve Watts Chair, Council on Tall Buildings and Urban Habitat believed we cannot know for sure just yet. “The ultimate future of real estate will be driven by the ‘next big thing’: a piece of technology, innovation or ingenuity so powerful as to reshape the way we live and work. What exactly, might take us by surprise – for as Henry Ford said: ‘If I had asked people what they wanted, they would have said faster horses’,” said Watts.

Discussing on key elements of future cities, Irfan Younus Head of Research, Savills Investment Management said: “Strong economic growth and wealth will be maximised in cities that invest in infrastructure, attract talent and innovate, allowing them to take advantage of urbanisation and the developing knowledge economy.” Hank Dittmar Urbanist and Principal of Hank Dittmar Associates supported Younus’s statement: “The real-estate industry will have to be nimble to respond to climate change, rapid urbanisation, failed states and migration, and the restructuring of work. Through it all, the traditional qualities of walkable, mixed urban development, well served by public transport, will continue to hold value over the long term.”

The future may hold many uncertainties and our experts’ opinions may differ regarding where the next decade will take the real estate markets. Nonetheless, one point on which our experts could all agree is the future of global real estate is changing, said Yolande Barnes Head of Savills World Research. “Economic, geopolitical, social, demographic, and climate change will make impacts, but new technologies will help us to manage these and make sense of the new risks. Alternative asset classes are likely to outperform the traditional ones in the next decade.”

 
 

Key Contacts

Linh Dinh Huong

Linh Dinh Huong

National Head
Marketing Communication

Savills Hanoi

+84 24 3946 1300 Ext 112