GLOBAL – Invested real estate market is expected to grow by almost 40% in value over the next five years but the European market is likely to see a reduction is appreciation, according to research presented by RREEF.
Details of the latest quarterly global real estate study reveal the value of property will rise from $9.8trn (€7.1trn) in 2006 to $13.7trn in 2011, albeit this is at a slower rate than experienced in the recent bull market when the US real estate sector rose by 20% in 2006 alone.
The real estate investment house, as a division of Deutsche Bank, is not predicting a market downturn across the continental market as European property should still rise by around $1.1trn.
But European appreciation is predicted to slow from 70% of the 10% gain on the previous year in 2007 to around 30%, as development becomes the dominant factor, and the gain drops to around 4% through "the easing of rental growth and the upward movement in cap rates", said RREEF.
"The surge in development activity is set to have a particularly significant impact in 2009 and 2010 when it could represent around 50% of value change across the European market," REEFF predicted in its report.
Throughout the cycle, sale and leaseback is expected to remain constant and contribute approximately 5-10% of market growth across all continents.
While the US still appears to make the largest gain of $1.5trn over that period, the Asian property market is predicted to double to over $1.3trn with new developments contributing $460bn.
Emerging markets of China and India property are set to grow by around 160%, suggested the real estate asset manager, while Latin American real estate should grow by 120% and Eastern Europe will see growth of 100%.
The mature markets will show markedly slower gains of just 40% in mature Asia and 20% in Europe the US.
But given the lack of "institutionalisation" in the potential for emerging markets real estate, the global total of value in these countries will still be just 13%, while North America and Western Europe will account for 70% of property value, said RREEF.