Geopolitical uncertainty shapes global real estate transaction volumes in quest for safe haven - Savills

02 June 2017

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

The total marks a 12% 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%. Therefore any slowdown attributed to the election of Donald Trump as president in the US 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 -21% traded in US dollar terms than the previous year. Investment into the UK fell by 38% in 2016 however Savills points out that Q1 2017 was the strongest ever first quarter in terms of investment volume in London (£4.34 billion) as the city demonstrates its resilience as a world leading investment market – and the attraction of cheap sterling lures buyers.

View the graph showing annual global investment flows here

Yolande Barnes, head of world research at Savills, says: “In the last 18 months geopolitical issues have become a major driver of trading behaviour in real estate. 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 stabilising 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.”

Rasheed Hassan, head of cross border investment at Savills, adds: “In an age of comparative risk, many of the investors we are talking to are searching for trophy assets in key markets where they see a safe haven for capital in the long term. Whilst the report points out overall trading volumes have moved away from the record levels set in 2015, the greatest shift we have seen is to do with who is shopping where – the recent influx, following Brexit, of Asian investors into London and other key global cities for example. Its this change that is arguably the greatest impact recent geopolitical events have had on global real estate trading.”

 
 

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Key Contacts

Yolande Barnes

Yolande Barnes

Director
World Research

Savills Margaret Street

+44 (0) 20 7409 8899

 

Rasheed Hassan

Rasheed Hassan

Director
Cross Border Investment

Savills Margaret Street

+44 (0) 20 7409 8836