Real estate trumps gold
The importance of real estate as a global asset class and wealth creator is underscored by research done by the UK-based Savills group. In a report released earlier this month, Savills estimates the total value of all developed real estate globally — residential and commercial buildings, agricultural land and forestry — at US$217 trillion.
That amounts to 2.7 times the world’s GDP, making up roughly 60% of mainstream global investments such as equities, securitised debt and gold.
“To give the global figure context, the total value of all the gold ever mined is only about $6 trillion, which pales in comparison to the total value of developed property by a factor of 36 to 1,” says Yolande Barnes, head of global research at Savills. She notes that the value of global real estate exceeds by almost a third the total value of all globally traded equities and securitised debt instruments. “This highlights the important role that real estate plays in economies worldwide.”
Residential property accounts for the biggest component of global real estate at $162 trillion or 75% of the total. About 2.5bn households globally own the homes they live in, placing residential bricks and mortar as the sector that is most closely tied with the fortunes of ordinary people, says Barnes. Some 21% of the world’s residential asset value ($34 trillion) sits in North America though only 5% of the population lives there.
While the value of SA’s residential property market is of course smaller, it is still substantial, with an estimated 6m formal homes collectively worth about $260bn.