The value of invested real estate around the world is set to increase by 12 percent over the next two years as capital values continue to recover, according to global property services firm, DTZ.
In its annual Money into Property report which monitors the value of “investment grade real estate”, the firm predicted the growth would come from increased activity by investors and lenders alike.
Hans Vrensen, global head of research at DTZ, said: “This improved market sentiment is supported by our own analysis of available equity capital and debt.”
“The legacy debt issue is not as big a problem as we originally feared because sufficient new equity capital is available. We are already seeing widespread evidence of this new equity capital being used to put practical solutions in place,” he said.
Global “invested stock” decreased by 3.7 percent in 2009, when measured against fixed exchange rates, or by 6 percent, when measured in dollar terms, DTZ said. This reflected a total global real estate stock of just less than $11 trillion, compared with $11.6 trillion in 2008.
DTZ said the global decline would have been steeper if it were not for Asia Pacific, which grew by 8 percent in the year – mainly due to increases in investment activity in China. Europe and the US, however, showed declines in 2009 of 13 percent and 6 percent respectively.
The firm also said the global loan-to-value ratio had increased to a record 64 percent as a result of a 20 percent decrease in the value of “private equity” over the past two years. The rise to 64 percent was a 6 percent rise since the top of the market in 2007. Of the indebted regions, Asia Pacific was the least with a loan-to-value ratio of 55 percent, while Europe’s loan-to-value was 63 percent and the US had the highest at 71 percent.
But DTZ said “prime properties” in almost 90 percent of the 172 markets researched in the report are now trading at or below fair value, which it said was in “sharp contrast” to observations made in last year’s Money into Property report.
The firm said that “speedy re-pricing” in the UK had reduced its attractiveness while US, Asia Pacific and continental European markets were increasing in appeal to investors.