According to Savills World Research, since 2016 global real estate values have risen by 5% to an enormous US$228 trillion. This makes gobal real estate far more valuable than all stocks, shares and securitised debt put together, which currently stands at US$170 trillion. Even the value of all the gold in the world ever mined throughout the ages amounts to a paltry US$6.5 trillion in comparison.
Not only have world real estate values grown, they have grown real fast! GDP only grew by 2.3% last year, so the world’s real estate has grown faster than the world’s income! This all equates to the world owning real estate that is worth 2.8 times its GDP. Commercial real estate grew the fastest, by a whopping 7%, only surpassed by gloabl equities which grew by 9%.
Residential real estate monopolises
The majority of the world’s real estate value – three quarters of it to be precise –is in residential property – US$168.5 trillion. Not surprising when you consider that there are 2.05 billion houses in the world. This makes the average home, in developed countries, worth approximately US$82,000.
Take North America and Europe for example – North America has 7% of the world’s population but 22% of it’s real estate, and Europe 23% of the real estate and 11% of the population. Growth potential is naturally the highest in less developed countries – with Africa having the greatest potential for growth.
Savills World Research estimate that only 34% of all this property can actually be invested in – ie. rented or traded. Commercial property is much more ‘investable’ with 67% of it – US$21.8 trillion – available for investment.
‘Green’ property, such as farms, estates and agricultural land increased its value by 7% on last year – worth US$27.2 trillion. This section will grow as there is still scope for more land to be purchased and used for agriculture in the future. Much of this though will be in developing countries, with Africa again showing the greatest potential for growth.
Top 10 countries
10 countries have 70% of all the world’s real estate value, with China and the US making up almost half of it (42%).
China might have the biggest real estate value but real estate isn’t traded much there. It’s the mature markets like the US and the UK that see the highest volumes of trade. Investors look for transparency and market strength, as can be seen from the graph below.
The hunt for long-term income
As an asset class there is no doubt that real estate is the world’s most important. Since the dreadful crisis of 2008 it has increased its value and and has become an attractive investment in many markets – certainly compared to local interest rates!
Real estate has always been a ‘bit special’ as far as investment categories go, you can develop it, manage it, and it changes. Years ago many investors thought that its ‘illiquidity’ made it a bit risky, but these days that’s not the case, if anything it’s the least risky of the investment options. Savills World Research came to this conclusion “We think the nature of real estate risk has changed in the new investing environment. The characteristics of real estate have a new value in the global hunt for long-term income.”