How much is all the property in the world worth? According to Savills research, almost $230 trillion.
Global asset prices have risen by a total of 5 per cent in the last year, according to the firm, with the total worth of real estate on the planet rising from $217 trillion in early 2016 to $228 trillion. The figure is a staggering reminder tha global real estate is a more valuable asset class than all stocks, shares and securitised debt combined – which, together amount to just US$170 trillion. The value of all the gold ever mined throughout history pales into even greater insignificance at a mere US$6.5 trillion.
GDP (at constant prices) grew by 2.3 per cent in 2015/16, so the world’s real estate asset value has grown faster than its income. This means that the world now owns real estate assets worth 2.8 times its annual income (GDP). This real estate asset to income ratio has increased from 2.7 in 2015.
Most world real estate value is contained in residential property, which makes up three quarters of all real estate stock. By itself, this amounts to US$168.5 trillion. There are approximately 2.05 billion households across the world, so the average home is valued at around US$82,000.
That value is of course concentrated in developed countries, – primarily North America and Europe. North America contains only 7 per cent of the global population, but 22 per cent of all residential property assets by value. Similarly, Europe contains 11 per cent of the world’s peoples, but 23 per cent of residential property by value.
However, total commercial real estate value grew faster, at 7 per cent, than residential during 2016. This asset price growth has been much more rapid than global bonds (2 per cent), but slower than global equities, which increased in value by 9 per cent.
The greatest potential for growth is in less developed economies. Much of Asia has already seen real estate asset price growth alongside the region’s rise of per-head GDP. But Africa appears to have the greatest potential yet for value growth as national economies and household incomes increase. The Middle East & Africa region currently contains 19 per cent of the world population, but residential property on that continent is only worth 6 per cent of the global total.
“Because most of the world’s households are homeowners, we estimate that only 34 per cent of all world residential property is ‘investable’ – actually capable of being let to occupants and traded between investors,” says Savills.
“The proportion of global commercial property that is investable is 67 per cent. That’s higher than residential but, even in this sector, there are a large number of individuals, companies and organisations that own and occupy their own buildings.”
The role of real estate across the world is changing, the report also argues.
Along with other assets such as commodities, equities and bonds, it has increased significantly in value since the global financial crisis of 2008, spurred on by the intervention of central banks and their suppression of gilt yields. However, now that yields have little room to shift further downward, the scope for capital growth “becomes more limited and dependent on rental growth happening first”, says Savills.
“This means that the income-generating capabilities of real estate have become more important and currently look attractive in many markets compared to local interest rates,” the report concludes.
How much is all the property in the world worth?
5th February 2016
The total value of all the property on the planet is now worth almost three times the world’s GDP, according to Savills.
The adviser’s staggering research has analysed property prices across the entire developed property world, including commercial and residential property, as well as agricultural and forestry real estate. Together, they amount to a total of $217 trillion, which is the equivalent of around 60 per cent of mainstream global assets.
“To give this figure context, the total value of all the gold ever mined is approximately US$6 trillion, which pales in comparison to the total value of developed property by a factor of 36 to 1,” comments Yolande Barnes, Head of Savills World Research.
Residential property accounted for 75 per cent of the total value of global property = $162 trillion – which also has the largest spread of ownership with approximately 2.5 billion households and most closely tied with the fortunes of ordinary people. Residential real estate value is broadly distributed in line with the size of affluent populations: China accounts for nearly a quarter of the total value, containing nearly a fifth of the world’s population. Yet the weight of value lies with the West, over a fifth (21 per cent) of the world’s total residential asset value is in North America despite the fact that only 5 percent of the population lives there.
The trend for western nations to dominate real estate is most pronounced in commercial markets, where nearly half of the total asset value resides in North America. Europe makes up over a quarter while Asia and Australasia contain 22 percent, leaving just 5 percent for South America, the Middle East and Africa.
The report highlights the important role that real estate plays in economies worldwide, concludes Savills’ report.
“Real estate is the pre-eminent asset class which will be most impacted by global monetary conditions and investment activity and which, in turn, has the power to most impact national and international economies,” adds Barnes.Google+