Research - JUNE 2, 2017

Geopolitical uncertainty shapes global real estate transaction volumes

by Released

The latest paper from Savills, Global Real Estate Capital: Ebbs & Flows, reveals the level of global trading in real estate in 2016 was 25 percent ahead of the 10-year average, totalling nearly $770 billion, as investors recognise property as a safe haven for capital in the face of geopolitical uncertainty.

“In the last 18 months geopolitical issues have become a major driver of trading behavior in real estate,” says Yolande Barnes, head of world research at Savills. “The industry is learning to live with a higher degree of risk stemming from political uncertainty, and real estate has taken on a new role in investment portfolios becoming increasingly popular as an income-producing asset. It remains to be seen whether this is a permanent change, but overall conditions mean we foresee global trading volumes stabilizing at just over their longer-term average levels for the next two years before seeing a slight uptick in 2019 and increasing at a solid rate thereafter.”

The total marks a 12 percent slowdown on 2015 figures; however, Savills points out global real estate transaction volumes grew consistently from 2009 to peak in the first quarter of 2016 at an increase of nearly 300 percent. Therefore, any slowdown attributed to the election of Donald Trump as president of the United States and ongoing political changes in Europe comes after near-record trading levels.

According to the report, overall it was EMEA markets that saw the greatest slowdown in 2016 with a decrease of –21 percent traded in U.S. dollar terms compared with the previous year. Investment into the United Kingdom fell by 38 percent in 2016; however, Savills points out that first quarter 2017 was the strongest ever first quarter in terms of investment volume in London (£4.34 billion/$5.59 billion) as the city demonstrates its resilience as a world-leading investment market, and the attraction of cheap sterling lures buyers.

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