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Despite heightened uncertainty global real estate investment is strong

Global real estate investment volumes are unlikely to reach the same levels seen in 2018 which was record year but they could match levels seen in 2017, according to the latest forecast.

They reached US$1.8 trillion last year and US$1.7 trillion the previous year, a figure that could be matched in 2019 despite heightened macro-economic uncertainty, according to international real estate advisor Savills.

In an update to its Impact global research programme, Savills says that while investment volumes slowed in the first quarter of 2019 as political and economic uncertainty impacted the market, activity picked up in the second quarter leaving global volumes at the half year mark at US$810 billion, just slightly below the same period in 2018 when it was US$840 billion.

‘Despite the slight dip in investment volumes, asset values have remained stable. The fall in volumes is not due to people not wanting real estate but the search for income producing assets, which is a key driver of the market, leading to investors typically buying to hold, which is limiting stock levels and supressing activity. When opportunities do come to the market we are seeing demand for everything, provided the price is right,’ said Rasheed Hassan, head of Savills Cross Border Investment.

Savills also says that cross-border capital flows have also slowed with the first half of 2019 volumes 20% below the same period in 2018 in 2019. The biggest fall by value was outbound flows from Europe with US$43.8 billion invested in the first six months of 2019, a 26% fall compared to the same period last year.

However, investments from Europe to Asia Pacific actually increased 67% over this period, albeit off a low base, and now accounts for 6% of all cross border European investment. According to Savills, this is part of a wider trend as inbound cross border investment to Asia Pacific increased 14% in the first half of 2019 compared to the first half of 2018.

‘Global economic uncertainty looks set to continue in the short to medium term, which led to the IMF cutting its growth forecasts for the global economy for this year and next,’ said Sophie Chick, head of Savills World Research.

‘On the flip side, however, interest rates are expected to remain low or even be cut in some cases and there is very little distress in the market. The search for yield continues and the comparatively attractive returns real estate can offer keeps demand high,’ she added.