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Savills World Research, the international real estate expert, published several impact reports last month analyzing the specific forecasts for each segment in 2021. A look back at the global outlook for real estate investment, prime residential real estate, and tips for investing in Asia-Pacific.
“According to Oxford Economics, global GDP growth in 2021 is expected to be the fastest in 40 years, although it will only be enough to bring global GDP back to pre-crisis levels“, Savills said, estimating that with the development of vaccines and their distribution, economic recovery could occur. The reports reveal that advanced countries are taking the “whatever it takes” approach to supporting their economies “with very low interest rates and quantitative easing programs“, which will have an impact on real estate investment this year.
“The industrial and residential sectors experienced more modest volume declines, with market share gains representing 21% and 28% of total investment, respectively. The resilience of these sectors in the face of structural change means that the trend is expected to continue in 2021”.
However, investors seem to be looking to the long term, as Savills points out, noting that funds targeting the real estate sector continue to grow. “At the beginning of 4Q2020, there were more than 1,000 funds on the market – more than double the number in January 2016, according to Preqin. The funds are now targeting nearly $300 billion worth of investments, suggesting investment momentum through 2021“, the report said.
Savills points out that investors are also looking for green investments, given that real estate accounts for 40 percent of carbon emissions.
Prime residences are expected to grow by an average of 1.6 per cent in 2021.
For prime residential properties, 30 cities that make up its Savills World Cities Prime Residential Index have been analyzed and an average growth of 1.6% for 2021 is expected. “Sentiment is improving as the roll-out of Covid-19 vaccines begins in many countries. Despite continuing uncertainties, prime residential real estate is expected to remain an active market this year“, says Savills.
“Many of the factors that helped stimulate prime residential markets in the second half of 2020 are expected to continue into 2021, including low inventory levels in some locations and a desire for more space“, Savills says. “Historically low interest rates, which are expected to remain low for some time, also make the sector attractive for wealth preservation. These factors, and the sector’s strong fundamentals, mean that positive price growth is expected in 19 cities, compared with nine cities that are expected to experience a slight decline in prices“.
Among the cities expected to grow by more than 6% this year are Seoul, which is expected to continue its strong growth over last year, with a price increase of 8-9.9% expected in 2021, supported by low interest rates, strong economic performance and supply shortages. Berlin and Sydney are also performing well, with the former seeing demand for real estate exceeding supply, while growth in the latter is expected to be the result of an expected improvement in economic activity.
In the 4 to 6% growth range are Guangzhou, which is benefiting from urban regeneration projects and its proximity to Shenzhen. In the United States, Miami offers more space in residential units and attractive tax benefits. In India, Mumbai‘s expected growth is due to lower stamp duties and low mortgage rates. However, this follows price declines due to oversupply, the report points out.
In the 0 to 4 percent growth range, the reports highlight cities with low supply markets such as San Francisco, Amsterdam, Tokyo and London, which “are expected to experience a turnaround, with expected growth in supply value sustained by the value of supply from its peak in 2014.
Shanghai, Shenzhen, Hangzhou and Beijing recorded good results last year and this trend is expected to continue in 2021. “The forecast for Beijing is slightly lower than other cities in China due to heavy local regulation“, Savills said.
For the 2 to 0% growth level, these are the cities, whose prices will fall, which depend more than others on international demand and whose performance was hampered by travel restrictions last year: Dubai, Kuala Lumpur, Lisbon and Paris.
“A weaker economic environment is expected to hamper growth in a number of Southern European cities, including Milan, Rome, Barcelona and Madrid, while oversupply continues to play a role in a few cities in this category [-2% to 0%] of price growth, namely Bangkok and Dubai“, Savills adds.
Those that will experience growth of less than 2% are : Hong Kong, where prices have been affected by political uncertainty, according to the research firm; New York, whose downward trend is due to oversupply. “The pandemic has caused a temporary distancing from densely populated urban life. However, it remains to be seen whether this becomes a long-term trend“.
Promising investment sectors
According to reports, the logistics sector should look good this year, with online retail and flexible work models experiencing unprecedented growth as a result of the pandemic. However, investors are struggling to find stocks.
“The office sector is expected to remain the largest and most important investment of choice. The focus will be on low-risk assets with stable income characteristics in the best locations“, says Savills.
“The residential sector could attract a growing share of global investment, supported by strong underlying fundamentals and cross-border investors who are expanding and consolidating their portfolios“, the group adds.
Another sector with potential? Housing and health care for the elderly, which offer long-term income potential “through” aging populations and the growing trend of health and wellness.
“Data centers are a growing alternative sector and offer opportunities for portfolio diversification. Returns are attractive and pent-up demand is expected to fuel growth in 2021, but barriers to entry are high“, says Savills. “Last year, life sciences came to the forefront. A strong increase in capital raising should stimulate real estate investment opportunities in a sector that is resistant to changing work habits“.
In addition, taking into account the possible widespread availability of Covid-19 vaccines by 2021, the investment outlook for Asia Pacific is optimistic.
“We expect a relaxation of containment measures and a decrease in more general restrictions, as well as a return to cross-border real estate investment. In the near term, low interest rates are expected to persist and continue to support real estate, while substantial unallocated funds in the region suggest that closing deals will be competitive“, Savills said.
Accurate investment advice
Under several headings, the research firm provides advice on basic investments, basic plus investments, value-added investments, opportunistic investments and alternative investments.
Core investments include Class A offices in regional cities such as Seoul, Singapore, Sydney, Taipei and Ho Chi Minh City. These offices have “weighted average long-term lease maturities and security provisions for tenants“. Savills suggests looking at Australia’s main industrial property, including warehouses and storage facilities, which serve densely populated areas. In addition, Japan’s multi-family sector is a defensive game, “acting as a ballast for investors’ portfolios“.
Core plus” investments include logistics assets in South Korea, mainland China, coastal regions including the Great Bay area, the Yangtze Delta and the Beijing-Tianjin-Hebei region. Taiwan is also of interest as it is a place where e-commerce, e-food markets and the technology sector are developing rapidly. Retail spaces such as small community malls are not to be excluded as they target local communities with stable tenants and higher yields in major Chinese cities such as Shanghai and Shenzhen.
“The multi-family sector in Yokohama is an attractive alternative to the more expensive areas of Tokyo. Larger developments, including the possibility of an integrated resort, could bring more dynamism to the area“, the group adds.
Value-added investments include Class A and B offices in Ho Chi Minh City as occupancy rates have remained stable during the pandemic and foreign tenants are looking for space in Vietnam to locate there.
For opportunistic investments, the office market in Hyderabad, India, is highlighted, particularly as it has received strong government support through investor-friendly policies and infrastructure development. “Hyderabad is also emerging as a key business market and one of India’s leading technology destinations”. In Hong Kong, although the government has removed double stamp duty for commercial properties to mitigate the decline in capital value, retail properties can be attractive. In this case, host properties that are struggling to renovate or convert are recommended and can be an option that can generate attractive returns and capital growth.
In terms of alternative investments, it is recalled that data centers have been “driven by the expansion of the digital economy, the growing use of cloud services and the 5G mobile data network, particularly in China and Australia“.
Read also > LUXURY REAL ESTATE: THE PARISIAN MARKET IS LIKELY TO EXPERIENCE A DROP IN PRICES
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Savills World Research, the international real estate expert, published several impact reports last month analyzing the specific forecasts for each segment in 2021. A look back at the global outlook for real estate investment, prime residential real estate, and tips for investing in Asia-Pacific.
“According to Oxford Economics, global GDP growth in 2021 is expected to be the fastest in 40 years, although it will only be enough to bring global GDP back to pre-crisis levels“, Savills said, estimating that with the development of vaccines and their distribution, economic recovery could occur. The reports reveal that advanced countries are taking the “whatever it takes” approach to supporting their economies “with very low interest rates and quantitative easing programs“, which will have an impact on real estate investment this year.
“The industrial and residential sectors experienced more modest volume declines, with market share gains representing 21% and 28% of total investment, respectively. The resilience of these sectors in the face of structural change means that the trend is expected to continue in 2021”.
However, investors seem to be looking to the long term, as Savills points out, noting that funds targeting the real estate sector continue to grow. “At the beginning of 4Q2020, there were more than 1,000 funds on the market – more than double the number in January 2016, according to Preqin. The funds are now targeting nearly $300 billion worth of investments, suggesting investment momentum through 2021“, the report said.
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Savills World Research, the international real estate expert, published several impact reports last month analyzing the specific forecasts for each segment in 2021. A look back at the global outlook for real estate investment, prime residential real estate, and tips for investing in Asia-Pacific.
“According to Oxford Economics, global GDP growth in 2021 is expected to be the fastest in 40 years, although it will only be enough to bring global GDP back to pre-crisis levels“, Savills said, estimating that with the development of vaccines and their distribution, economic recovery could occur. The reports reveal that advanced countries are taking the “whatever it takes” approach to supporting their economies “with very low interest rates and quantitative easing programs“, which will have an impact on real estate investment this year.
“The industrial and residential sectors experienced more modest volume declines, with market share gains representing 21% and 28% of total investment, respectively. The resilience of these sectors in the face of structural change means that the trend is expected to continue in 2021”.
However, investors seem to be looking to the long term, as Savills points out, noting that funds targeting the real estate sector continue to grow. “At the beginning of 4Q2020, there were more than 1,000 funds on the market – more than double the number in January 2016, according to Preqin. The funds are now targeting nearly $300 billion worth of investments, suggesting investment momentum through 2021“, the report said.
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