A snapshot of three interesting global real estate trends.
Student housing has grown into an exciting new global asset class
A mobile and globalised student population spawns a new investment class in student accommodation. New wealth has fuelled the numbers of Asian students seeking an English-language education worldwide and there’s pressure for limited quality accommodation in many cities, which means attractive investor returns.
In mature markets, student housing looks distinctly counter-cyclical; one of the best performing sectors during the global financial crisis (click below to expand fig. 1).
The business of providing purpose-built, professionally rented student accommodation is established in the US and is maturing in the UK, but other countries are earlier on the investment curve. This offers investors new opportunities. Australia benefits from English language and proximity to fast growing Asian markets. So student housing has expanded rapidly in the past decade, but supply and vacancy rates are low, forcing rents up. Germany, France and the Netherlands are at an early stage of development with very limited quantities of student housing provision.
We foresee the major emerging student housing markets of the Netherlands, France and Germany combined could eventually be worth an additional $0.75 billion per annum over the next 20 years.
Super-commuters are choosing to work and live in two locations
Ultra high net worth individuals (UHNWIs) fall into two distinct groups when choosing where to live. There are the ‘Dispersers’, who set up residence in glorious isolation or return to their various hometown roots. Then there are the ‘Agglomerators’, who cluster in particular hotspots around the globe, including world cities.
Most ultra-wealthy households have more than one home and their international business and leisure interests mean that these very often span continents. Consequently, commuting for this group takes on a whole new meaning.
An analysis of UHNWI real estate holdings reveals that there are five main ‘super-commuting’ routes that are well travelled by UHNWIs on a regular basis, often in private jets, as they move between homes (click below to expand fig. 2). London, thanks to its convenient time zone, culture and cosmopolitan character, is often the nexus of these home hubs.
In Europe, the London to Monaco route is a well-worn one and likely to become more so as Monaco’s status as both tax haven and leisure destination increases. Meanwhile, historic and cultural ties are apparent in the Sydney to London and London to Mumbai (or Delhi) super-commutes.
New York acts as a US hub between Europe, through London, and the Pacific rim, through LA. There are also many internal North American super-commutes between centres of leisure and business. That they are so contained within the US is testament to the sheer variety of environments and cities available there.
Many Asian super-commute pairings combine leisure or homeland with a business safe haven for newly created wealth. The Singapore to Jakarta axis is a good example of this, while Shenzhen to Hong Kong provides residents with a foothold in both mainland China and trade-friendly Hong Kong.
Investors are looking for income in developing farmland markets
Agricultural land has long been considered a ‘safe haven’ asset, like gold, resilient during times of economic uncertainty. Investors are now broadening their horizons to new global agriculture markets with an eye on greater income returns. Asian diets have become more westernised and this is also underpinning the demand for farmland globally.
The Savills Global Farmland Index shows capital annualised growth since 2002 of 20%, with the highest growth recorded in the emerging markets of Romania, Hungary, Poland, Zambia, Brazil and Mozambique. The star performer over the 10 years to 2012 was Romania, where average farmland values grew by almost 40% per year (click below to expand fig. 3).
These returns have encouraged investment but infrastructure is key to success. Values are highest where there is access to ports, highways and railroads, aiding distribution and maximising farm profits.
Access to a natural water supply and irrigation systems is also a key factor as is the regulatory environment which varies significantly by country.
Some western agricultural markets have been saturated with lifestyle investors and this has pushed pure agriculturalists to search for real income returns, underpinned by crop yield. We expect this search for global agricultural returns to continue.