Value of real estate assets decreased at end of 2022 by 2.8 percent compared to the previous year

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KUWAIT CITY, Oct 9: A recent report showed that the total value of real estate in the world reached $379.7 trillion at the end of 2022, a decrease of 2.8 percent from the previous year, reports Al-Rai daily.

Savills, a global specialist in real estate consulting, reported that despite the annual decline in the value of global real estate, the long-term trend recorded an increase of 18.7 percent over the past three years, noting that the total value of global real estate shows that real estate remains the largest store of wealth in the world.

The report added: “The value of real estate in the world may have declined in 2022, but real estate remains the largest store of global wealth by a large margin. The value of real estate exceeds the value of global stock and bond markets combined, and the size of global GDP is nearly four times the size.”

Savills explained that the value of all the gold extracted in the world, amounting to ($12.2 trillion), is small compared to the size of real estate wealth, as the value of gold represents only a little more than 3 percent of the value of global real estate.

The report monitored that just over 3 quarters of real estate value is linked to residential real estate, with a value of $287.6 trillion at the end of 2022, while commercial real estate represents about 13 percent, and agricultural lands represent 11 percent.

Last year, valuations held up well into the first half of 2022 before rising interest rates and growing economic uncertainty weakened residential and commercial markets around the world, a trend that continues into 2023.

Residential real estate fell by 1.6 percent in 2022, but on a 3-year basis, between 2019 and 2022, its growth of 21.1 percent ranked second after gold.

Residential values have benefited from very low interest rates over the last three-year period, coupled with the focus on the home during pandemic-related lockdowns.

Commercial real estate fell by 1.8 percent in 2022, due to weak conditions in the second half of the year, but it rose by 14.4 percent during the three-year period. This is largely due to the low interest rate environment and government stimulus, which has encouraged investors to allocate more capital to real estate.

Agricultural land decreased by 11.4 percent on an annual basis in 2022, but increased by 8.8 percent on a 3-year basis. The epidemic affected the value of agricultural land in 2020, but it rebounded strongly in 2021, only to falter in 2022.

Despite the decline in real estate values in 2022, bond and stock markets also faced difficulties. Debt securities shrank by 3.2 percent, while stocks suffered a 20.3 percent year-on-year decline.

But over the past three years, all of these major asset classes have achieved positive growth, with residential real estate significantly outperforming both bonds and stocks.

The report continued: “Given the economic turmoil caused first by the Covid-19 pandemic and then the rise in inflation and interest rates, it is perhaps not surprising that gold witnessed the largest increase in value, as it rose by 2.2 percent over the past year and 26.9 percent over three years.” . However, the total value of gold is still insignificant compared to the value of real estate markets around the world.”

China maintains its position as the world’s most valuable real estate market. Given that the country is home to 1.4 billion people, it is perhaps not surprising that it accounts for a quarter (26 percent) of global real estate value, according to the report.

The United States ranks second overall, representing 19 percent of the global real estate market. The G7 countries, in addition to China, account for more than two-thirds of the total global real estate value.

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