Emerging markets to provide most growth

Emerging markets will provide investors with more growth than established markets once the trough of the current economic downturn has been reached, UBS Global Asset Management said in its latest research report.

In its Global Real Estate Research: Emerging market real estate strategies report released today, UBS said that following the downturn the “engine of economic growth” was unlikely to rest on the West's shoulders but that “emerging markets should increasingly constitute the primary driver of growth”.

UBS said that investors able to find countries with cash, surpluses and decent savings rates would be best placed to “unlock new opportunities”.

Elisabeth Troni, global real estate economist at UBS Global Asset Management, said the lack of debt at the consumer level would be a key factor for maintaining growth among emerging countries.

“One key theme to emerge as a result of the ongoing deleveraging is the rebalancing of growth away from external demand,” she said. “This is a positive trend for the future of many emerging markets where growth in domestic private consumption is outpacing real gross domestic product growth.”

She added that investors considering allocations to emerging market investments should consider their investments in terms of risk-adjusted returns and they should not assume investments made in these markets will guarantee high returns.

On a country level, UBS said China and India were the most attractive growth economies for real estate investors, based in part on growing average incomes leading to subsequent growth in consumption. UBS said that while India’s swathes of undeveloped land had led to a saturation of developers which have struggled to realise their land holdings and a pricing bubble, the need for a local partner for international investors would not dissipate.

Meanwhile China, the report added, was still attractive to investors because of its high savings rate and low interest rates even if in the short term the country was suffering declinging house prices and falling sales volumes.