Wed, 11/07/2018 - 08:45
The professionally managed global real estate investment market grew by 15 per cent, from USD7.4 trillion in 2016 to USD8.5 trillion in 2017, according to the annual MSCI Real Estate Market Size Report.
The report details notable changes to the size of 25 markets across the globe, as contained in MSCI’s IPD Global Annual Property Index, as well as seven other countries that form part of MSCI’s IPD Pan-Asia Annual Property Index. Among the constituents of the Index, the following important market size estimates were reported.
The United Kingdom and Germany saw their market size increase by more than USD100 billion over the last 12 months, primarily due to currency appreciation, with the euro rising by 14 per cent against the US dollar (USD) in 2017. The British pound also strengthened by 9 per cent against USD, in contrast to 2016 when the pound depreciated by 16 per cent as a result of the Brexit vote.
Germany replaced China as the fourth-largest market. Germany experienced significant growth in its real estate market and overtook China which had held this position for two years (2015 and 2016). Although both markets grew in 2017, Germany’s increase was proportionately larger.
Switzerland and Sweden have the largest relative real estate investment market sizes in Europe, as measured by the ratio of market size to GDP. However, Norway, Europe’s second wealthiest country in terms of GDP per capita, falls behind several of its Nordic neighbours in relative real estate market size.
Spain’s market size increased 39 per cent, driven by a 14 per cent currency impact due to euro appreciation against USD, 9 per cent capital value growth and a residual impact of 14 per cent.
The US saw its weighting decrease after seven successive years of increases. Although the US remained the largest market in 2017, its share of the 25-country index decreased from 42.1 per cent to 40 per cent in the IPD Global Annual Property Index.
“Although individual market size estimates have changed from year to year, weightings have proved relatively consistent for each of the 25 countries within MSCI’s IPD Global Annual Property Index since 2004,” said Jay McNamara, Head of Real Estate for MSCI. “These estimates are fundamental to the creation of MSCI’s multinational real estate indexes. We believe growth will have a positive impact over the long term, and are committed to serving our clients as the market continues to grow and they make important investment decisions.”
Currency movement was a big driver of market size, effectively increasing the global real estate investment market by approximately 5.3 per cent in USD, in contrast to their negative impact in 2016 (-2.3 per cent). Capital value growth and new developments in the market, such as new construction and sale and leaseback transactions, also contributed to the growth in market size.
“While currency fluctuations have undoubtedly impacted relative weights of countries within the Index over time, capital value growth has also been a long-term feature driving the shape of the market today and many countries showed positive capital value growth in their local currency in 2017,” said McNamara.
“Additionally, it is important to remember the impact that the global financial crisis had on the landscape we see today. Both the UK and the US suffered from substantial negative capital growth. Currently, the absolute market sizes of these two countries has increased by 40 per cent and 70 per cent, respectively, from their lowest levels recorded during 2008 and 2009,” added McNamara. “This has not been the case in all markets globally. Japan’s market size, for example, is still below its 2009 level despite rising in each of the past three years.”
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