Real estate tipped to be ‘best investment’ for 2016
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Real estate looks set to be the most solid investment over the course of 2016, financial advisors from across the globe have said.
With market consensus revealing flat equities this year as a result of rate rises and the end of quantitative easing in the US, with bonds set for a tough year too, it seems as if property is where it’s at.
Many advisors have warned of volatility within the financial investment marketplace due to China’s economic issues, low oil prices and Middle Eastern tension. Real estate could bypass these potential negatives, with investors homing in on this comparative safe haven.
According to Colliers Global Investment Outlook, which was released earlier this week, 2016 is set to be the ‘year of real estate’. Investor sentiment has been tipped to remain extremely positive towards the asset class over the course of this year, with primary markets still continuing to attract the most investment.
Meanwhile, secondary markets will also see rising interest from investors due to a stable economic environment coupled with low interest rates. Real Capital Analytics found that property-related transactions accounted for $625 billion of direct property investment across the globe during the first nine months of last year. This was an impressive 11 per cent rise over the amount brought in over the same time period the year prior, the organisation confirmed. In 2016, those figures are tipped to soar even higher.
John B. Friedrichsen, CFO of Colliers International, said: “Our report suggests that…long term secure investment in core markets will be the norm. Large volumes of capital already raised will increasingly seek out opportunities in tier-two cities and in recovering markets.”
The report found that, of the 600 plus investors questioned, more than half – 52 per cent – will look to boost their investment in real estate this year, meaning that overall investment demand in the asset class across the world will skyrocket. Some of the main targets for investors include Paris, New York, Tokyo, London and Sydney.
Total global real estate transactions are predicted to well exceed levels recorded in 2014 and look set to come close to those levels last seen prior to the 2008 financial crisis. Major investors – those with multi-asset real estate portfolios – also confirmed that they would likely add to their property stock over the course of the next 12 months.
In the US, it was predicted that office space, warehousing and shopping malls would see the largest amount of investment interest in 2016. In terms of current investor plans in the US, a massive 94 per cent reported that they would be adding to their US property investment this year, with their key target cities being San Francisco, New York and Los Angeles. Just five per cent reported that they would be looking to invest in Mexico, with even fewer looking to add to their property stock in Brazil.
On the downside, real estate investment comes with its own risks – there is the feeling that the economic situation could shift suddenly with little notice. Some investors are nervous about the potential changes relating to Chinese and US interest rates and the impact this may have on their investments.
However, despite these risks, the majority of real estate investors are in fact signing up to more debts in order to pay for their purchases. This keeps demand for property in world class cities strong, said the report. Indeed, the equity part of the investment cycle is being replaced by a debt phase, says Colliers, especially in Europe where low interest rates look set to ensure property is the ‘new fixed income play’.