Property as an asset class has been growing in prominence in recent years, and investment in this sector has now made it the case that it accounts for the majority of all assets across the globe.
According to a newly released study from Savills, real estate assets are worth some 60 per cent of the value of all global assets, including more traditional classes such as equities, bonds, shares and gold.
The current value of all property across the world, according to the Savills report, amounts to some $217 trillion. When compared to assets like gold, where the total value of all gold ever mined amounts to just $6 trillion, and globally traded equities and securitised debt instruments, which property value beats out by a third, we see that property has managed to become a global superpower, making other asset classes pale into insignificance.
When looking at property on a global scale, however, it’s important to know what people are investing in and where.
On a global scale, residential property remains the key asset in the real estate sector, accounting for three-quarters of the total value of the market, be it in owner-occupied property or those that are purchased and built for renting out.
By way of comparison, just 13 per cent of the value of property is made up of commercial investments, while agriculture accounts for a mere 12 per cent of the total money invested in real estate.
The global world of property
One of the main factors that has allowed property to become a hugely scalable asset in recent times has been the ease of cross border investment, where people who live in one country will invest in others.
Gateway cities such as London, Paris, New York and Sydney, to name but a few, have allowed confident investors to spend big in markets other than their own, largely spurred on by the inherent strength of these markets.
According to the Savills report, since the 2008 global financial there has been a huge leap in cross-border investment levels. It said that in 2009, 17 per cent of all deals for property were carried out between two nations. But by 2015, this had risen to 20 per cent as people became more confident about spending money outside of their own country.
In the same period, Savills said, the value of trades done across borders has rocketed by 334 per cent as real estate established itself as a truly global asset class.
Global investment trends
One factor that can make investment difficult in property on a global scale is just how it can differ from country to country. There are at present a number of different trends taking shape, all of which present wonderful opportunities to investors the world over.
For example, the Far East gives investors the chance to put some serious money into the commercial sector, with high demand for office spaces in a number of cities across the region as economies recover and businesses start to grow.
This can be seen in China, where both Shanghai and Beijing are seeing strong demand for Grade A premium office spaces from financial institutions looking to grow. With a shortage in supply across these cities, there are opportunities to invest in offices where rents are likely to be sustained for the medium and long-term future.
There are similar opportunities in areas where populations are growing. For example, many Australian cities are seeing sharp rises in population, which means a supply and demand issue for property that can be challenged with greater levels of investment, an especially exciting prospect given that some cities are expecting to double their populations within the next 35 years. This sort of sustained demand over a longer period of time presents a great chance for investors.
However, it is student property that is really grabbing the attention of global buyers. In recent years, it has become the number one British property class, with as much as £15 billion invested in the last three years. This trend is now spreading globally as well, according to Savills.
The UK, US, France and Australia are all prime areas for investors as demand from students for global higher education continues to grow. A lack of suitable accommodation is what fuels the potential for the sector, with countries like Australia struggling to meet demand with only 10 per cent of requirements met by dedicated student property.