Stock market volatility. China uncertainty. Greek confusion. The past year has hardly been ideal for real estate investors, but activity has been “robust”, according to new figures, with global investors shaking off concerns.
The report (Winning in Growth Cities) from Cushman & Wakefield shows that global property investment rose 16 per cent in the year to June 2015 to reach a total of $942.8 billion – just 13 per cent below the pre-crisis peak and the highest level recorded since 2008.
The market is far from uniform, though, with results varying across regions and apparently established capital flows starting to change. Risk tolerances that steadily loosened as the global economic recovery spread have now rebounded in the face of rising uncertainty. Now, capital has flown back towards to the most liquid and accessible markets: the top 25 gateway cities saw their market share of investment rise from 51 per cent to 53 per cent.
North America is the fastest growing target for foreign capital, with New York remaining number one. London was the second largest market overall but top for foreign buyers, while Tokyo, Los Angeles and San Francisco made up the rest of the top five – unchanged on last year.
“Despite the strong overall growth and the major gateway cities remaining largely unmoved, change is more evident at regional levels,” explains the report’s author, David Hutchings, Head of EMEA Investment Strategy at Cushman & Wakefield.
“Europe is still a magnet for capital from all regions but North America has actually been the fastest growing target for foreign capital – a fact reflected in the dominance of US cities in this year’s report. Fourteen of the top 25 cities are in the USA, while Germany, the second most popular country by number, has just three cities making the list. Investment into these US cities grew by 32 per cent compared to just 7 per cent growth for non-US cities in the top 25.
“Outward investment by US players is also dominating global capital flows, accounting for 42 per cent of all foreign investment between regions in the past year and growing by 25 per cent. Asian investment globally comes in at number two, with a 25 per cent market share, as investors’ search for greater global diversification has, if anything, been accelerated by fears of a regional slowdown but has also become more focused with the US a notable winner.”
While increased global uncertainty will continue to affect investors, investment is forecast to grow 17 per cent over the year to mid-2016, driven, in part, by corporate confidence. Investment would then be at a record high of $1.1 trillion, led by growth in Europe and North America.