One of the most aggressive Australian investors, Macquarie, says global real estate markets are in for a ‘tougher ride’ with marked regional variances sparked by the US economic slowdown and financial volatility.
In its Real Estate Market Outlook 2007/2008, published this week for the first time outside Australia, it predicted below-trend economic growth in the US until the end of the decade.
It said the low point in the US economic cycle would be this year with an annual growth of 1.9% with a range of housing indicators pointing to the possibility of further weakness in the US economy.
However, it said that although the health of the US economy was important for the global economy, Asia was now driving the strength in the global economy, particularly China, which would provide a buffer against a moderate US slowdown.
It predicts that China’s and India’s economies will grow by 10% and 9% a year respectively from 2007 to 2011. ‘Our experience on the ground in these markets highlights that lending conditions haven’t altered to the extent we’ve seen in the US, Australia, the UK and continental Europe,’ it said.
Overall across global markets it said the most recent office cycle has been the strongest in 20 years while retail and industrial had also performed well. It said moving forward there would be a ‘moderation’ in the performance of offices with slowing rental growth in the US and softening yields.
It said there would be a similar performance for the UK’s Central London markets with significant supply variations between the West End and the City.
Macquarie said Asia offered the most positive outlook across the globe, particularly its office market, which would have a knock-on effect in Australia which is ‘well-place to benefit from strong economic growth across Asia thanks to commodities demand.’