A report published today by international real estate advisor Savills has ranked the United States of America (USA), the United Arab Emirates (UAE) and Singapore respectively as the top three countries for residential investability on the basis of economic growth and market recovery.
The new Savills World Residential Investability Ranking focuses on countries with cities and resort locations that have consistently attracted investor interest over recent years. It also advises investors in international residential real estate to combine an understanding of macro metrics with an appreciation of local, shorter term drivers of house prices when making buying decisions.
Ranking 14 leading countries on the basis of broad economic and demographic factors, Savills looked at key demand variables such as population growth, wealth and economic growth, alongside supply and price levels, in order to see which countries are set to perform best. It lists the United States of America a clear number one for investability on the basis of economic growth and market recovery potential.
Local considerations had to be taken into consideration, the firm said. “There is a world of difference within the USA between top tech cities and languishing rustbelt ones,” said Yolande Barnes, director of Savills world research. Savills tips San Francisco among the very best of their selected residential markets.
The UAE comes second in their country rankings for residential investment potential, as domestic wealth creation and increasing demographic and regional demand continues to grow. The Dubai market has seen this type of more robust demand take the place of more speculative overseas investment in recent years but, Savills assesses, Dubai is too near the top of the present cycle to top the investability league.
Commenting on the report, David Godchaux, CEO of Core, the UAE associate of Savills, said the current softening of Dubai’s residential prices offer investors a good opportunity to buy into a market which has strong growth potential over the next five years. “We expect prices in Dubai to rebound in 2016 as the UAE gears up for EXPO 2020,” Godchaux said. “The property market has matured a great deal after the government took measures to stamp out short-term speculators. We are confident that investors looking for long-term gains will do well as Dubai is a safe and established global business centre in the Middle East which has broad appeal to a range of buyers from the region and far beyond.”
Singapore and the UK took 3rd and 4th place respectively in the Savills survey, based on economic performance and growth prospects, alongside a growing population. China and Hong Kong occupy 11th and 12th places among the 14 countries. In these locations Savills see current pricing as cyclically high and offering poorer value for short to medium term investors. “These are still big and investible markets, but we’d expect to see rental growth and yield movement before they once again top our investability list,” said Barnes.
“It is vital that investors understand the long term demographic, economic and supply-side drivers of demand – and therefore sustainable value – when making investment decisions. These can be different at national and local level.
“When a growing population, growing affluence and limited housing or land supply converge, we would anticipate real house price growth. The absence of one or more of these variables can stall a housing market and the absence of two or more can send property values downward,” Barnes added.