Real es­tate trumps gold

Financial Mail - Investors Monthly - - Opening Bell -

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.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.