Global property investments are expected to reach a record EUR 478 bn ($600 bn) for 2006, according to a new report by Frankfurt-based Degi Research. Property prices are still rising sharply despite stable or only modestly increasing rents, leading to further yield compression. But Degi sees the trend towards falling yields reversing from late 2007 as the growing internationalisation of property investments continues unabated.
Global property investments are expected to reach a record EUR 478 bn ($600 bn) for 2006, according to a new report by Frankfurt-based Degi Research. Property prices are still rising sharply despite stable or only modestly increasing rents, leading to further yield compression. But Degi sees the trend towards falling yields reversing from late 2007 as the growing internationalisation of property investments continues unabated.
Market transparency will continue to rise as transactions increase and new forms of listed investment vehicles appear, said Thomas Beyerle, head of Degi's research and strategy unit in a statement that coincided with the start of the real estate trade fair Expo Real in Munich on Monday. Degi is the property investment management arm of the German insurer Allianz.
Making Degi's position clear on the ongoing debate about the impending introduction of REITS in Germany, Beyerle said that the new real estate investment vehicles are vital. 'Only with the introduction of REITs will Germany possess the basis for a broadly-based property index.' The suitability of REITs for property derivatives will further help to broaden the spectrum of property-based capital investment products, he said.
This in turn will further stimulate demand for property, Beyerle noted. The top 10 locations in DEGI's location scoring scheme, which measures the risk involved for property investors against a variety of economic and property-business criteria, includes eight locations in the US, with New York heading the list. London comes in third and Sydney ranks sixth.
The current recovery and upturn of global property markets have been nurtured by a combination of factors, including strong economic performances, historically low interest rates, a high level of liquidity among international investors plus increasing transparency worldwide. 'Property is becoming an increasingly attractive investment option for insurance companies and pension funds,' Degi noted.