The last 10 years or so have seen a significant swing in real estate prices around the world. We have seen some markets emerging from nowhere to become leaders amongst international real estate investors but there are signs that these trends are turning back to more traditional paths. We will look back upon the last decade as one of the most volatile and challenging in the investment arena. We have seen the highs prior to the US mortgage crash, the worldwide economy crashing and governments rushing to prop up ailing financial institutions. One thing is for certain, we won’t forget the last decade!
Trends returning to normal
If you were just joining the real estate investment arena over the last few years then you might not be aware of the more traditional trends which tended to focus upon the likes of the US and Europe with other hotspots emerging as a kind of after-thought. The situation over the last decade has seen the likes of Brazil, and South America as a whole, together with Asia, and China in particular, grabbing the headlines.
London has always been a prominent feature within the international real estate arena although the likes of Europe as a whole have fared disastrously. However, there are signs that over exuberance in some parts of South America and Asia may have pushed property prices to levels which are not necessarily supported by local economies.
China in trouble
While there is no doubt that China will be a major economic powerhouse for many years to come there is also no doubt that the economy is struggling at the moment. This has been reflected in the real estate market where some of China’s largest cities have seen a significant drop in real estate values. It is a difficult market to forecast because of the enormity of the country set against very specific real estate markets which centre round the larger cities. We have seen significant financial pressure on some of China’s larger property companies and indeed there is still some bloodletting left in this particular area.
Brazil has for many years now been the powerhouse of South America and many investors have made significant returns on real estate and non-real estate assets. Again, Brazil is a very difficult country to forecast because of the massive gap between the rich and poor and the fact that successive governments seem unable or unwilling to address this problem. Over the last few days we have seen a number of economists forecasting difficulties ahead for South America, and more predominantly Brazil, as well as disappointing results from Brazilian-based property companies.
It will be interesting to see whether this is a short-term blip in the long-term growth cycle of South America or indeed whether the economic balance is shifting again.
There are signs that investors are looking towards the more traditional real estate markets with the likes of South America and Asia (more predominantly China) beginning to struggle. Many experts would suggest that property prices were pushed too far ahead bearing in mind the difficult economic climate and indeed reality is now starting to hit home. The likes of London, and to a lesser extent the rest of the UK, continue to perform admirably especially compared to their European counterparts. However, once the European Union is back on its feet and the US economy recovers, will we see investors returning to traditional real estate markets?