- Global investment recovery projected by Q3 2024, led by China and positive sentiment.
- Real estate, valued at $380 trillion, remains the world's largest wealth store, outpacing equities and gold.
- Investor confidence increasing, with many expecting substantial growth in investment activity next year.
Global investment is set to mostly recover to longer-term trend levels by the third quarter of 2024, with China and European countries doing so in 2025, according to Savills Research.
Real estate remains the king
Speaking at the Navigating Turbulent Waters: 2024 Real Estate Outlook event in Singapore, Savills United Kingdom director of world research, Paul Tostevin emphasised the importance of the real estate sector.
“380 trillion US dollars, that’s what we calculated the total value of real estate in 2022. Two-thirds of that is residential and combined. This is the world’s biggest store of wealth, so this is an important sector,” he said.
“And to put that into comparison, it’s worth more than equities and debt securities combined and gold. Something we associate with a safe store of wealth is actually only 3% of total property value.”
How real estate fared against other assets, 2019-2022
“The three years to the end of 2022, we saw growth of 19% over that period as a whole, second only to gold in the case of residential real estate.”
However, Tostevin noted that things have since changed.
The post-COVID-19 surge in investment volumes has dipped since its 2022 peak, driven by uncertainties caused by an inflationary environment and international developments such as the US-China trade war and the Russo-Ukrainian war.
Global real estate investment
“In terms of total real estate investment volumes, as we know, volumes are down around 50%, back to around 2013 levels, and this has been driven by economic uncertainty of the higher interest rate environment we now find ourselves in. The falls are consistent across the board, so again. This is global.”
Global real estate investment (by sector)
Additionally, Tostevin pointed out that all sectors within global real estate have seen investments fall by around 40% to 60%, with offices facing the sharpest drop, while the retail and hotel sectors fared slightly better.
Soft landing remains the consensus
“The good news is that inflation has now peaked, and that should mean we start to see rates plateau, having risen to these recent highs with some possible rate cuts starting in the US, possibly towards the end of next year,” Tostevin said.
“Of course, the other factor at play is the economic outlook, and the prospects for that have been changing quite frequently.”
World consensus GDP forecasts by month of publication
“At the beginning of 2022, things were looking more positive. The view was that inflation was transitory. Then we saw the war in Ukraine and the subsequent energy price crisis that really dipped sentiment.
“Beginning of this year, we had the reopening of China. Things start to pick up again, and I think now we’ve sort of headed towards that sort of consensus of a soft landing.
“On the plus side, we’ve got relative resilience of household and corporate balance sheets, a recovery in real wages.
“But on the challenges side, we’ve got the high-interest rate environment, and that’s all going to result in sub-trend growth globally under 3% next year.”
Investors hopeful for 2024
Indeed, investor confidence has also been recovering, with a recent survey conducted by Savills Global Research showing an expected increase in investment activity in 2024.
Predicted change in investment activity
According to the survey, 48% of respondents predicted a moderate rise in investment in the prime office sector, while 57% expected the same for the industrial sector.
Furthermore, 57% forecasted a moderate rise in retail sector investment, while 52% believed the residential sector would see the same growth.