4 reasons why the market for cross-border real estate investment will grow over the next 10 years
According to CBRE and Real Estate Analytics, from 2007 to 2016, investors invested more than $ 6.7 trillion in overseas real estate. Since 2010, investments in this sector have grown by an average of 20% per year.
Investing in global real estate
The USA is the largest real estate market in terms of foreign investment. Over the past five years, the number of transactions with foreign buyers has increased here by half, and their share increased from 4.1% to 5%. The same trend is observed in other markets popular with international investors: for example, in Cyprus, since 2013, the number of transactions has increased 2.5 times, and the share of foreign investors has reached almost 30%.
Number of transactions with foreign property buyers
Why the volume of cross-border real estate investment will grow in the next 10 years?
According to the International Monetary Fund (IMF), over the past 30 years, global GDP has declined only once: by 0.1% in 2009. By the end of 2010, the world economy recovered its positive momentum and, according to forecasts, will continue to grow at the same pace for at least the next four years.
Dynamics of world GDP
increased flow of foreign investment from China over the past 10 years
Nations, which are the largest buyers of real estate abroad, are showing even more impressive growth. According to Reuters, in 2017, China invested a record 42.2 billion dollars in overseas property. According to the IMF forecast, Chinese GDP growth in the next four years will exceed 6% per year.
Stable economic growth in the coming years is also expected in the Gulf countries: Saudi Arabia (2% per year), Iran (4%), Qatar and the United Arab Emirates (3%). According to Knight Frank experts, the number of millionaires in China and India will increase more than doubled by 2026 compared with 2016 (to 1.7 million and 0.7 million people, respectively).
Worldwide, the flow of tourists is growing: over the past 10 years, the number of tourist arrivals has increased from 918 million to 1.23 billion. According to Statista, more than half of travelers arrive at their destination by plane. According to the World Bank, the number of air passengers during this period increased more than one and a half times: from 2.209 billion people in 2007 to 3.696 billion in 2016. According to Statista, over the next 20 years, their number will increase by another 4.7%.
Total number of airline passengers in the world
According to the International Air Transport Association (IATA), the majority of air travelers are in the Asia-Pacific region (33.6%).
Distribution of passenger and cargo air traffic by region in 2016
At the same time, Europe is the largest international tourist destination: in 2016, 616 million tourist arrivals from abroad were recorded in this region. According to the forecasts of the organization Euromonitor International, the number of arrivals in the 10 most visited cities in Europe from 2017 to 2025 will increase by an average of a quarter.
As a rule, along with tourism, the demand for real estate grows: some buy houses and holiday apartments in the country where they spend their holidays more often, others invest in housing for short-term rent in popular tourist markets.
Projected growth in tourist arrivals in the 10 most visited cities in Europe from 2017 to 2025
The most popular immigration destinations in the world are Europe and the USA. According to official data, from 2008 to 2016, the number of residence permits issued in the EU and America grew by 32%. In 2016, the most numerous recipients of a European residence permit were citizens of Ukraine, Syria, the United States, India and China, the Americans — citizens of Mexico, the Dominican Republic, China, the Philippines, and Vietnam.
Demand for real estate is promoted by programs for obtaining a residence permit in exchange for investments. The most popular European “golden visa” programs are offered by Greece and Latvia, where resident status is awarded when buying property worth 250 thousand euros, Spain and Portugal, where the minimum investment threshold is 500 thousand euros. During the work of the program in Greece, more than 2.1 thousand “golden visas” were issued, in Portugal – about 5.5 thousand.
According to the Organization for Economic Cooperation and Development (OECD), from 2007 to 2015, the number of foreign students in its member countries more than doubled.
The most popular country is the USA. In the 2016–2017 school year, more than 1 million students from abroad studied in the United States. Over the past 10 years, their number has been growing annually by an average of 6%.
Number of international students in OECD countries
Instability in emerging markets contributes to the growth of cross-border investments: risks at home stimulate investors to acquire real estate in Europe and the USA. And vice versa: risk-averse investors from developed countries are looking for greater returns in emerging markets.