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Investments in real property: what is bullish trend caused by?

01 June 05:38 PM

World news, investments. In 2011 real estate market finally returned to its pre-crises level of 2008, having successfully overcome the decline that had lasted more than two years. Paying attention to the flow-in of considerable investments into this sector, experts predict even higher growth and make most optimistic predictions. However, the dynamics of recovery is not the same everywhere.

Predictions on the increase of real estate prices in the world. What is bullish trend caused by?

According to experts of Forex Academy and stock exchange trade of Masterforex-V, the growth of real estate prices is supported by such fundamental world factors as:

1. Investment growth. According to predictions of the world’s leading consulting companies, in the current 2011 year the overall sum of investments into the world real estate can, according to some estimations, amount to 329 billion dollars. This is 17% more than the same index numbers in 2010.

2. The top performer, unexpectedly to many, will become Asian-Pacific region. There investments in real estate will increase almost twice. In 2011 this sector will receive the flow-in of more than 104 billion dollars, which is 45% more than last year. The sole sum of investments certainly cannot impress by its vastness, but the growth is very impressive.

3. Investments in US real estate. Real estate on American continent still remains very attractive to. In 2011 they will agree to invest in this sector 14% more means than last year.  This means the overall sum of investment about 111 billion dollars.

4. Concerning EMEA region (Europe, Middle East, and Africa), it will considerably fall behind its neighbours, being able to attract only 114 billion dollars. Despite the importance of the overall sum, this is only 2% more than in 2010.

5. Features of capitals. The characteristic feature of all these processes will become the local origin of capitals that are directed into real property. Contrary to pre-crises period, investors will prefer to invest money in well-known countries. For the overwhelming majority of businessmen these are their own states.

6. In Europe and Middle East local capital will provide more than 90% of all investments in real estate. These index numbers are somewhat lower in Northern Africa, about 80 %.

7. Investment climate. Improvement of investment climate in the world will be accompanied by the development of bank sector, which will be called to share all possible risks with investors.

8. The scale of transactions on real estate rent will increase, as this form of commercial relationships is much more predictable than the usual purchase-sale. Predictions on the rent are always more exact than predictions on a possible future cost of one object or another.

Another Chinese boom

What is another Chinese boom caused by?

• considerable investment growth. Investments in real estate on the territory of PRC exceed even most optimistic expectations;

• considerable growth of index numbers. It took only four months of the current year for the index numbers to exceed the index numbers of the same period in 2010 by 34%;

• increasing sums of investments. According to the Bureau of Statistics of PRC, this sector of economy has received the flow-in of about 205.2 billion dollars, which is 1.334 trillion yuans.

• the general area of real estate units under construction till May 2011 amounted to 3,524.72 mln. sq. m. This is 33.2% more than in the middle of 2010.

• moreover, since January 2011 real estate units of the general area of 568.41 mln. sq. m. started to be constructed, which is 24.4% more than during the first five months of the previous year.

• 171.27 mln. sq. m. have already been commissioned this year. The growth, in comparison to the same period last year, amounted to 14%.

Russian real estate attracts investors

The growth of investments in real property on the territory of Russian Federation is not much lower than the Chinese one. During the first quarter of 2011 it amounted to 30%, which gave ground to make optimistic plans for the whole year:

1. The growth of primary market of real estate amounted to 66%, secondary – 25%.

2. Agreements on mortgage amounted to 26% of the overall number of transactions at the secondary market in Moscow, whereas in Russia these index numbers are even higher.

3. The average price of accommodation in Russia is currently predicted to increase by 9-10%, and in Moscow – by 15-17%. Russian experts are further expecting to receive the yearly increase of the finished projects at the level of 6%.

South-Eastern Europe becomes interesting to investors

During the first quarter of 2011 the volume of transactions at the market of real estate in Central and Eastern Europe amounted to 1.2 billion Euro. It is a very high index number for such region:

• period of low liquidity. After the global economic crises, another considerable period of low liquidity was encountered at real estate market;

• growth of investment activity. Investment activity in South-Eastern Europe started to grow only at the end of 2010. Investors started to actively return to the real estate market of Croatia. They have also appeared in Bulgaria and Romania, where investment activity has not been mentioned for a long time.

• Poland remains the most attractive country in terms of investment. Investors’ activity at this market remains very high.

• to some extent worse are the matters in Czech Republic and Hungary, but experts expect that the real estate market is going to experience considerable activity in 2011.

The Editorial Board of “Market Leader” magazine holds a questionnaire in traders’forum: in your opinion, will the current trend of real estate market continue?

• yes, of course, on a world-wide scale.

• no, this sector is very unpredicted and involves numerous risks.

• maybe, this market has always been one of the most dynamically developing. However, it is at this market where so-called “bubbles” can often be met.

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