The expected recovery of global economies in 2004/2005 raises the question of when global property markets might begin to recover. A real estate recovery will vary by market and property type across the globe. But, with global real estate markets generally showing signs of a nascent recovery, investors may consider acquiring properties while prices are relatively low. Many properties can be bought for less than replacement costs, and investments can be financed at relatively low interest rates.
Global demographic trends suggest that worldwide demand for real estate investments will continue to grow. With the ageing of the populations of developed countries, more people are looking to real estate as an investment to meet their income needs for retirement, healthcare in their senior years, college funds for children, and other purposes. Pension funds, opportunity funds and other institutional investors are increasing their portfolio allocations for real estate.
Real estate is an income generator; a relatively stable investment that offers attractive yields compared with bonds and other fixed-income investments. It has been a long time coming, but real estate is now competitive with stocks, bonds and other forms of investment in attracting global capital.
Jan Siemons is a partner at Ernst & Young Real Estate Advisory Services.