Emerging markets to drive property growth

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INCREASED real estate investments in emerging markets such as the Philippines is a trend that the global property market will be seeing this year, according to a real estate services firm.

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In a report, global commercial real estate services company Cushman & Wakefield forecast that global real estate trading volumes will increase 4.2 percent, driven by several factors such as increased profit trading, a strong debt supply, unsatisfied demand among existing players in the segment and emerging new sources of new capital.

Global trading volumes saw a downturn in 2015 as global trading activity fell by 2.4 percent for the first time in six years to $1.29 trillion.

“This reflected the strength of the US dollar as well as a pullback in Asia, notably for development land,” Cushman & Wakefield said. “This distortion was most apparent for Europe, with EMEA [Europe, the Middle East and Africa] volumes flat in dollar terms but 23 percent up in euros while North America saw the fastest growth measured in any currency.”

On the other hand, the report also noted that bright prospects are seen for emerging markets as they are forecast to have stable economic growth in the next few years.

“Emerging markets will also see a steady economic improvement in time, and indeed, some could start to stabilize later this year,” the report said.

Cushman & Wakefield said an increase in investment interest will be seen in emerging markets, as well as developed ones, as investors seek out global growth opportunities.

“While developed markets are likely to again outperform this year, for some emerging markets, conditions are already brighter, most notably those embracing reform like India, the Philippines and Mexico,” the report said.

The report highlighted the importance of reforms in economic growth while also noting the pros and cons of instituting such reforms.

“Reform is a key area impacting the market, both positively when we look at countries such as India and Spain, but also negatively as increased regulation adds to cost and business complexity,” the report said. “Positive reforms will be something investors watch closely and a key factor differentiating between opportunities in many instances.”

It also noted that domestic demand in emerging markets will likewise increase as both the middle classes grow and their savings and investment needs develop.

On a regional basis, Cushman & Wakefield noted that it was only the emerging markets in Asia that showed signs of growth in 2015, as the region was plagued with concerns over the slower economic backdrop and increased caution alongside stock shortages that lead to a fall in investment.

“While land sales in China were a significant part of this, the loss was broad-based across most sectors and all major markets, with only emerging targets such as Vietnam, the Philippines and Thailand, showing growth,” the report said.

It added: “Looking ahead, the lead for economic growth looks likely to be taken by India together with smaller South East Asian markets such as the Philippines and Vietnam.”

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