Worldwide real estate assets comprise nearly 60% of the value of all global assets, including equities, bonds and gold.
We estimate that the value of all developed real estate in the world amounts to approximately $217,000,000,000,000 (217 trillion US dollars, see fig. 1). This covers retail property, offices, industrial, hotels, residential, other commercial uses, and agricultural land.
FIGURE 1Global asset universe
*(values in US$ trillions – rounded) Sources: Savills Research, Bank for International Settlements, Dow Jones Total Stock Market Index, Oxford Economics
The world owns real estate assets of nearly three times its annual income. Global property value in 2015 amounted to 2.7 times the world’s GDP and represents an important store of national, corporate and individual wealth. It accounts for roughly 60% of all mainstream global assets. The value of all gold ever mined (in the region of $6 trillion) pales into insignificance next to the value of all developed real estate.
The fact that the value of global real estate exceeds by almost one-third the total value of all globally traded equities and securitised debt instruments highlights the important role it plays in economies worldwide (see fig. 2). Real estate is the pre-eminent asset class that will be most impacted by global monetary conditions and investment activity and which, in turn, has the power to most impact national and international economies.
FIGURE 2Global real estate universe in comparison
Sources: Savills Research, Bank for International Settlements, Dow Jones Total Stock Market Index, Oxford Economics
In recent years, quantitative easing and resulting low interest rates have suppressed real estate yields and fuelled high levels of asset appreciation globally. Investment activity and capital growth have swept around the major real estate markets of the world and led to asset price inflation in many instances.
We estimate that around one-third of the value of the global real estate market identified here is readily investable at scale (see fig. 3), with the remaining $145 trillion not being publicly traded in any meaningful way. Most of it, even in the commercial sector, is owner-occupied or owned by small and private entities.
FIGURE 3Global real estate universe
Sources: Savills Research, Oxford Economics
Of the $72.5 trillion of commercial and residential real estate that we count as ‘investable’, around $1.05 trillion or 1.45% was traded in big ticket deals of over $10 million in the 12 months to Q3 20151. This investment grade stock has increased in value by 3.56% in the two years since our last estimate of world real estate value in Q3 2013. This represents average annual growth rate in global capital values of 1.77% per annum but covers a range of experiences, from high-growth in the US to negative or no growth in parts of Asia.
This year we have included for the first time the value of agricultural land, at an estimated $26 trillion, of which about $7.8 trillion (around 30%) is corporately and institutionally invested. Most agricultural land is owned by non-investing entities, operators and occupiers, especially in emerging economies where this is a sector with great potential for further growth and investment. If the land is owned by non-investing entities, it is likely to be non-investable.
Not included in the global calculation is the value of local commercial properties: workshops, workspaces, shops and small business premises that are not part of the high quality commercial real estate universe that constitutes global property markets, but which are important components of economic growth and prosperity, especially in emerging markets. They are almost impossible to value at a global level but have huge potential for future investment as economies mature and real estate markets develop within them, adding to the global stock.
Overall, the most important component of global real estate value is the homes that people live in. By far the biggest proportion of these are owned by the people who inhabit them, which makes this sector the least concentrated, in terms of ownership, and most closely tied to the fortunes of ordinary people. There are approximately 2.5 billion households on the planet and those in developed economies occupy housing at much higher price points than those in less developed economies. We estimate that the median value of the dwellings occupied by all these households is $43,000.
1These deals form the basis of the information and analysis on global investment trends analysed in the Around the World in Dollars and Cents research programme