Following a study by the real estate investment company CBRE, it found that the planet’s biggest real estate markets belong to Los Angeles, New York, and Tokyo.
By investigating the connection between the size of the real estate market, in each respective country, and the amount of money that is spent on real estate properties in over 100 cities globally, CBRE claimed that the biggest real estate markets to invest in are located in LA, New York, Tokyo, London, and Paris. All of which have a total stock value of just under 28 trillion USD. CBRE’s study came to the conclusion that there is a strong interaction between the amount of capital that is invested in a city and the size of the real estate market.
• “Tokyo is the world’s largest single market with a total value of investable real estate of $711 billion, followed by New York ($657 billion) and Los Angeles ($482 billion).”
• “Paris ($342 billion) and London ($334 billion) are the biggest European markets.”
• “The top 10 cities accounted for approximately $4.0 trillion–15% of global investable real estate stock.”
• “The largest five cities in the Americas (New York, Los Angeles, San Francisco, Chicago, Houston) represent $2 trillion of investable real estate; a figure that can be attributed to the free market nature of its economy and cities.”
• “Asia Pacific’s five largest cities (Tokyo, Seoul, Osaka, Sydney, Melbourne) amount to $1.5 trillion, although it is worth noting that data was not available for all cities in the region, including China.”
• “The relatively lower total of $1 trillion in Europe’s five largest cities (Paris, London, Madrid, Milan, Munich) is attributed to the influence of national boundaries, land use planning, and regional support programmes.”
There are exceptions to the aforementioned relationship between the size of the real estate market and the amount of capital that is invested into that market. Instead, some cities had a larger total of investment compared to the size of the market. A few real estate markets that produced larger investments that the size of the market would deem possible include Tampa, Charleston, Edinburgh, Sheffield, Oslo and Dusseldorf.
To understand and decipher the liquidity value of each market, CBRE additionally examined the proportions between the size of the market and the amount of capital invested. Cities with real estate markets that had the highest liquidity rankings include London with around 9 percent, Dallas and New York with approximately 7 percent of total real estate assets sold every year. Washington DC, Paris, LA and San Francisco traded just under 5 percent of real estate stock.
The global president of CBRE, Chris Ludeman said:
“The amount of stock available in each market is relevant to investors pursuing a global diversification strategy–a true market neutral portfolio needs to be weighted by city size. Most investors are not pursuing full global diversification, but many have a more tightly defined strategy such as ‘core real estate in global gateway cities’. It is important for these investors to know the relative size of the key investment markets to ensure portfolio balance.”
The US and China have a combined global real estate worth of around 85 trillion USD or 40 percent of the world’s real estate value due to population density and larger amounts of land.
Does the real estate market in Cyprus have any potential?
- The expansion of domestic and international businesses in Cyprus is bringing about the need for and development of more commercial real estate; in particular office buildings and complexes.
- The Cypriot Government offers incentives for investing in its real estate sectors.
- The cost of rent is increasing with high demand and low supply.
A growing need for more commercial office real estate
The heart of Cyprus and its business, Nicosia, is the island’s hive for its Governmental departments and a majority of the big corporate firms. Office properties in Cyprus usually consist of old-fashioned flats in the center of the busy cities. In the last few years, a move towards decentralization has been adopted.
With the help of Government incentives, investments in the island’s real estate have risen.
“Grant of the Cypriot citizenship to non–Cypriot entrepreneurs/ investors through the “Scheme for Naturalization of Investors in Cyprus by exception”
“As a part of its policies aiming to further encourage Foreign Direct Investment and to attract high net worth individuals to settle and do business in Cyprus the Council of Ministers, on the 13th of September 2016, revised the “Scheme for Naturalization of non-Cypriot investors by exception” and, thus, established the new criteria and terms based on which non–Cypriot entrepreneurs/ investors may acquire the Cypriot citizenship.”
With incentives such as these that give foreign investors a motive to invest in the island, the real estate market has expanded to meet the needs of the new businesses that are either starting up or moving to Cyprus. The real estate market of Cyprus can be broken down into two categories. Firstly, you have the main city centers of the island’s capital Nicosia, Larnaca and Limassol which are mainly influenced by domestic investments and needs. Secondly, you have the tourist areas close to the sea, for example, Paphos and Agia Napa, which are mainly influenced by foreign investments and needs.
The influx of international businesses to Cyprus due to the Government incentives has seen a rise in the development and construction of commercial real estate which has helped spur on the island’s somewhat lagging economy.
The cost of renting in Cyprus has also seen an increase of around 15 to 20 percent, mainly due to a rise in university students and the general inclination towards renting rather than buying property due to low wages and a lagging economy.
Cyprus could be both profitable and rewarding for local and foreign investors looking to invest in the real estate markets. The low-interest rates, booming tourism, and citizenship incentives by the government have attracted many investors from both off-shore and within the island to invest their money in the real estate markets. But it’s not just the real estate industry that has gained from this; for example, infrastructure, construction companies; moreover, the influx of foreign businesses has also generated new job opportunities which ultimately leads to the reduction of unemployment rates which then boost GDP and economic growth with more public spending. The need for housing has escalated over recent years, which in turn inevitably sends rent prices upwards.
Successful real estate markets are reinforced by the development of various projects either for tourism or for infrastructure which then helps with economic growth and welcomes foreign investments.
“After eight long years of house price falls, Cyprus´ housing market is now gaining momentum, amidst robust economic growth. During the year to Q1 2018, the nationwide residential property price index rose 1.82% (2.32% inflation-adjusted), its fifth consecutive quarter of y-o-y rises, according to the Central Bank of Cyprus, and the biggest annual increase since Q4 2008.”
“On a quarterly basis, residential property prices rose by 0.57% (0.33% inflation-adjusted) in Q1 2018.”
Nicosia, Cyprus´ capital, residential property prices rose by 1.24% during the year to Q1 2018 (1.74% inflation-adjusted)
- In Limassol, prices increased 2.66% y-o-y to Q1 2018 (3.17% inflation-adjusted)
- In Larnaca, prices increased 1.11% y-o-y to Q1 2018 (1.6% inflation-adjusted)
- In Paphos, prices rose by 1.99% y-o-y to Q1 2018 (2.5% inflation-adjusted)
- In Famagusta-Paralimni, residential property prices rose by 2.87% (3.38% inflation-adjusted) over the same period.
By property type, apartment prices increased 3.97% during the year to end-Q1 2018 (4.48% inflation-adjusted). On the other hand, nationwide house prices rose by 1.03% (1.53% inflation-adjusted) over the same period.