Global Property Investors Shift to Secondary Cities amid Price Hike

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Global investors in real estate are now shifting their focus on secondary cities. This is in line with the price soar that larger centres are experiencing. The transaction volume shares that are happening in a number of larger cities have significantly been diminishing all over the world for the last two years. As a result, more transactions are happening in secondary cities instead.

This is considered as a consistent theme even despite the presence of regional differences. Investors are now looking for opportunities that offer higher yield in significantly smaller cities all over the world. After all, many investors are seeing the pricing that is prevalent in major cities to be numbers that are already at such unsustainable levels.

Major cities have been seeing significant increases when it comes to pricing when compared to national averages. The move towards smaller cities comes along with seven quarters of slowed down activity in property investment. The number and the size of huge deals amounting to more than a billion dollars are considered to have factored in with the global property investment drop off.

Deal sizes seem to constantly be getting bigger. This also means that the money that goes to real estate is considerably exploding. Despite the growth of the size of the deals, its volumes have significantly declined. Commercial real estate deals in 2016 alone have amounted to more than $50 billion. So far this year, the deals are just above $20 billion.

If there is one area where billion-dollar deals seem to be growing, it would be land transactions that are happening in the emerging markets. It is getting more expensive to purchase land these days and this may be the reason for the statistics.

The picture is not homogenous for the rest of the world. Ranges of opportunities, returns, as well as opportunities for investments are now split by submarkets, cities, prime cities, secondary cities, as well as emerging cities. If there is a consistent theme all throughout, it would be cities.

The year’s biggest slowdown has been seen in New York, so far. This is despite the fact that the city has a real estate market that is considered as the most traded in the world. There has also been a significant drop off in really large deals for this year in New York. The pullback by investors from China is primarily cited as the reason for this decline. Chinese investors have been experiencing restrictions in the capital flow for several months now.

Meanwhile, both Europe and Asia-Pacific are enjoying some positive momentum when it comes to investment volumes. However, this has not always been the case. Europe seems to be on a consistent path as far as transaction volumes go. However, London does not share the same performance.

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