The World's Most Valuable Asset: Residential Property
The residential property market holds the largest share of global wealth and has consistently outperformed nearly every other asset class.
Potential investors exploring their financial options might contemplate bonds, funds, stocks, gold, or even cryptocurrencies, among various alternatives. However, it is real estate that distinguishes itself, not only by its predominant share of global investments but also by its remarkable surge in value over the past three years.
Unlocking the Potential of Property Investment: A £379.7 Trillion Market
Recent research conducted by Savills reveals that the global property market reached a staggering £379.7 trillion by the end of 2022, with over three-quarters of this wealth attributed to residential properties. Specifically, the residential sector accounted for a colossal £287.6 trillion in global value by the close of the previous year.
Residential Property Grows by 21.1%: A Win for Investors
Moreover, the residential property sector experienced an impressive 21.1% increase in value during the three-year span from 2019 to 2022. This growth proved resilient in the face of disruptive market forces, such as the COVID-19 pandemic. During this same period, the only asset class to exhibit stronger performance was gold, which witnessed a growth rate of 26.9%. Nevertheless, it's worth noting that the cumulative worth of gold remains dwarfed by the collective value of real estate markets worldwide.
Beyond Bonds and Equities: The Property Investment Advantage
Residential properties worldwide significantly outperformed bonds and equities over the last three years. In the past year alone, the global equity market witnessed a decline of 20.3%, followed by a decrease of 11.4% in agricultural land values and a 3.2% fall in debt securities.
Real Estate Wealth in Europe and North America: Buy-to-Let Insights
Savills offers an insight into this distribution, noting that "significant real estate wealth is concentrated in Europe and North America. The value of property in these two regions accounts for almost half (47%) of the total value worldwide, despite them being home to just 17% of the global population."
UK Residential Property Hits £8.68 Trillion
At the close of 2022, Savills estimates the total worth of UK residential property to reach a record-high of £8.68 trillion, reflecting a 5.1% growth from the previous year. This increase results from accelerated house price appreciation over the past three years.
Lucian Cook, head of research at Savills, notes, "The total value of all housing has risen by almost a quarter (+23%) since 2019, while outstanding mortgage debt increased by a lower +11%. So, while outstanding borrowing increased by £168 billion, the growth in the total equity pot was well over nine times that figure at £1.46 trillion."
UK's Strong Residential Property Market: A Buy-to-Let Haven
The UK residential property market retains its status as a highly favoured asset class among investors. It has demonstrated consistent strength despite significant economic changes and sustained interest, even in the face of rising mortgage rates. Estate agency Hamptons has issued a forecast predicting that the market will regain momentum starting in 2025, heralding the onset of a new "property market cycle." As such, the total value of UK residential property is poised to continue its upward trajectory.
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