The real estate markets in our 12 world cities are directly shaped by larger economic, political and business factors. The continued rebalancing of the financial system, the global concentration of wealth and the ongoing activities of central banks have all played a significant role in the performance of real estate in the world cities.
Here, we set out the three key themes that are creating challenges – as well as opportunities – for property investors.
The redrawing of the global economic map is having a significant impact on real estate markets. ‘New world’ economies, notably China and India, continue to see weakened growth, while older industrialised economies, including the US, UK and Japan, are recovering more strongly than many commentators anticipated. As a result, the runaway real estate growth of ‘new world’ cities has abated and in some cases, such as Mumbai and prime Hong Kong, has now reversed.
Meanwhile, the emergence of new economies, as personified by Dubai’s revival as a high-growth real estate centre, is indicative of a market that is recovering following very full corrections after 2008.
The picture is made more complex by the economic performance of world cities, which make a substantial contribution to a country’s GDP (see fig. 11). In some cases, city growth has been much greater than country GDP growth, with London and New York being good examples in recent years.
So perhaps it is not surprising that many of our world cities have seen much higher growth in their real estate values than their surrounding nations and, in a significant number of cases, there are active concerns that real estate markets have become overheated.
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