Currency and capital values help expand global property market by $1.1trn

The global real estate investment market increased by more than a trillion dollars in 2017 as favourable foreign exchange effects and capital-value growth helped lift the market’s size by 15%.

According to the annual MSCI Real Estate Market Size Report, the real estate investment market was up from $7.4trn in 2016 to $8.5trn in 2017.

The report – which estimates the size of the professionally managed global real estate investment market – stated that, due mainly to currency appreciation, the UK and Germany increased by more than $100bn in 2017.

During the period, the euro rose 14% against the US dollar, the report said. The British pound also had a 9% boost against the dollar, whereas, in 2016, the pound depreciated by 16% as a result of the Brexit vote.

Capital-value growth and new developments in the market, such as new construction and sale-and-leaseback transactions, also contributed to the growth in market size.

Jay McNamara, the head of real estate for MSCI, said: “While currency fluctuations have undoubtedly impacted relative weights of countries within the index over time, capital-value growth has also been a long-term feature driving the shape of the market today and many countries showed positive capital value growth in their local currency in 2017.

“Additionally, it is important to remember the impact that the global financial crisis had on the landscape we see today. Both the UK and the US suffered from substantial negative capital growth. Currently, the absolute market sizes of these two countries has increased by 40% and 70%, respectively, from their lowest levels recorded during 2008 and 2009.”

This has not been the case in all markets globally, McNamara said, adding that Japan’s market size, for example, is still below its 2009 level despite rising in each of the past three years.

The US remained the largest market in 2017 as it added $244.5bn to its size to reach $2.97bn but saw its weighting decrease after seven successive years of increases.

Japan and UK maintained their second and third positions at $798bn and $720bn, respectively.

The report said Germany replaced China as the fourth-largest market. Germany gained the position with a market size of $520bn overtaking the world’s most populous country which had a $482bn market size.

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