Wealth management company Dew has released a report that shows that the world’s largest real estate market is worth around $9.6 trillion.
The US and UK are the biggest markets, followed by China, Japan, Singapore and Hong Kong.
There are around 11,000 real estate firms across the world, but Dew found that there are over $1 trillion of real estate that is currently under management, which is around one third of the market.
“The real estate markets are changing and they are also getting more complex,” says Dew co-founder and CEO Dr David Lebovitz.
“We believe that the real estate sector is the most important asset class in the world and is the main driver of the global economy.”
The report also found that the biggest growth area for real estate over the past five years has been in China, with the country’s property market worth $2.6tn.
This represents a 30 per cent increase in real estate assets over the same period, and represents a huge increase in the value of the world market.
The report, published in the Financial Times, also found an increase in both the number of and the value for houses, apartments and villas in the US and Japan over the last five years.
“In the US, for example, we estimate that there has been a 35 per cent growth in the number and value of houses and apartments since 2006,” Dr Lebovaitz says.
“On a local basis, there’s been a 17 per cent annual increase in value for apartments in the United States.”
It is important to note that the US property market has been volatile, as recent high-profile home sales have shown.
“There’s been no shortage of new housing, but also there’s a lack of supply, and that’s caused by supply-side issues like the mortgage-interest rates that are now above 10 per cent,” Dr Li says.
He points to the housing crash in 2007 as a major factor in the rapid growth in real property prices.
“It’s a lot easier to get a house than it used to be, and it’s also much more difficult to get the mortgage down, but the banks don’t want to do that, so they’re not able to reduce their lending to house prices,” Dr Lim says.
There have also been several major financial crises since then, including the financial crisis of 2008, the Great Recession and the global financial crisis.
“If you look at all of those, the most significant real estate downturns have been in Europe, Asia, America and Japan,” Dr Lev says.
The impact of these crises have meant that real estate has lost much of its value in many countries, and some of the countries most expensive markets are still in the midst of a housing bubble.
“When you look back at the Great Depression and World War II, there were many times when the value was so high that you could get a nice house in a good area,” Dr Lew says.
But Dr Lev thinks that we should be able to recognise that there is a different process going on in the real property market in the developed world, and he believes that is one reason why the real market is now a lot more resilient.
“For instance, if you look in Australia or the UK, if they don’t have a housing crisis, then they’re still selling houses at a pretty high price,” he says.
For example, in London, a property for $1.7 million can now sell for more than $3 million.
“They’re selling their houses to investors, and in some cases that’s not very well-served in many cases,” Dr Levy says.”[Investors] are able to buy a house at that price because they know they have the same mortgage that they’ve got and they’re confident that they can make it.”
It has also been shown that many of the companies in the UK real estate industry are not taking risks in the market, and are not selling properties that are over-valued, like in the case of luxury property, where properties are worth much more than what the buyer is willing to pay.
“One of the problems that’s been created by these changes is that people are getting very excited about buying these properties and then not doing anything with them, so people have no confidence in their properties,” Dr Levin says.
Dew’s report also looks at the changing dynamics of the real economy.
“This is where you see real estate being used as a sort of asset class to invest in, and also to hedge against the risk that you might have with your investments,” Dr Liu says.
Mr Lebivitz says that while the US real estate bubble is the biggest in history, it is not the only bubble.
There is also a huge amount of risk that realtors are taking in the markets in Japan, the UK and China.
“These are very different markets, but there is some risk in Japan because the property market is much less regulated, and