A recent report unveiled that the total value of real estate worldwide reached $379.7 trillion by the close of 2022, marking a 2.8 percent decrease from the previous year.
Savills, a prominent global real estate consulting specialist, highlighted that despite this annual dip, the long-term trend showcased an 18.7 percent increase over the preceding three years. This underlines that real estate continues to be the predominant repository of wealth across the globe, reports Al-Rai daily.
The report emphasized, “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.” Comparatively, the value of gold, amounting to $12.2 trillion, represents only a fraction (a little over 3 percent) of the total value of global real estate.
The report further detailed that slightly over three-quarters of real estate value is tied to residential real estate, with a value of $287.6 trillion at the close of 2022. Commercial real estate constitutes about 13 percent, and agricultural lands make up 11 percent.
In the previous year, valuations held up well until the first half of 2022. However, rising interest rates and growing economic uncertainty weakened both residential and commercial markets worldwide, a trend that has persisted into 2023.
In specific categories, residential real estate witnessed a 1.6 percent decline in 2022 but showcased a notable 21.1 percent growth between 2019 and 2022, second only to gold. This growth was attributed to very low interest rates and a heightened focus on homes during pandemic-related lockdowns.
Commercial real estate experienced a 1.8 percent decline in 2022 due to weakened conditions in the latter part of the year but exhibited a 14.4 percent increase during the three-year period. The low interest rate environment and government stimulus played a significant role in encouraging increased capital allocation to real estate.
Agricultural land, on the other hand, saw an 11.4 percent decline in 2022 on an annual basis, but a promising 8.8 percent increase over a three-year span. The epidemic’s impact on the value of agricultural land in 2020 was followed by a strong rebound in 2021, although it faced challenges in 2022.
Despite the dip in real estate values in 2022, bond and stock markets also encountered difficulties, with debt securities shrinking by 3.2 percent and stocks suffering a 20.3 percent year-on-year decline.
However, over the past three years, all major asset classes achieved positive growth, with residential real estate notably outperforming both bonds and stocks.
China upheld its position as the world’s most valuable real estate market, constituting 26 percent of the total global real estate value, given its vast population of 1.4 billion. The United States secured the second position, representing 19 percent of the global real estate market. Collectively, the G7 countries, alongside China, account for over two-thirds of the total global real estate value.
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