Real Estate Gone Wild
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Contributed by: John Michael
John Michael Properties
Read more archived articles about Economy - Good
Real Estate Gone Wild
How Cheap Dollars And Cheap Flights Are Bringing Average Joes To A Market Near You.
By Rana Foroohar
Newsweek International
May 2 issue - Property, like politics, used to be local. After all, what demands more on-the-ground knowledge than buying a home? But over the last few years real estate has gone global. Already, there's a good chance you or someone you know owns a second home abroad. You may even unwittingly own a stake in a Guangzhou office block, via your pension fund. "Over the last five years, both direct and indirect cross-border real-estate investment has been on the rise," says Tony Horrell, CEO of European capital markets for property-investment firm Jones Lang LaSalle. "By some estimates, half of the world's wealth is now in real estate."
While such figures are impossible to verify, clearly investors in the United States and Europe are pouring money into foreign real estate. Experts say cross-border residential deals have been rising steadily throughout Europe and Asia for the last five years. Some buyers, encouraged by rising incomes and falling prices for air travel, have bought vacation pads in popular markets like Spain, Eastern Europe and Turkey. Many others have put money in the rapidly expanding universe of funds that allow retail investors to take a stake in commercial property worldwide. In Europe, cross-border commercial investments have increased 70 percent since 2000.
The attraction is strong performance—in the United Kingdom, for example, property has outperformed both stocks and bonds over the last one-, three-, five- and 10-year periods. In parts of the Costa del Sol in Spain, Turkish beach resorts including Kalkan, and parts of Cyprus, house prices have risen 100 percent or more since 2000. Many commercial-property funds have seen returns of 15 to 20 percent in recent years.
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