Shanghai
Waning construction activity means an era of slower expansion
What does the future hold for the rapidly changing global real estate market? We take a look at how our world cities will perform in 2020.
Shanghai’s real estate markets have been in limbo between huge demand from domestic investors, tighter credit conditions and cooling measures designed to check the rate of price growth. As a consequence, price growth has been flat.
2020 vision
Economic liberalisation: A free trade zone has been established as a testing ground for a number of social and economic reforms. Change has been slow to materialise and questions remain as to how it will develop longer term. Economic growth is reliant on construction and waning activity in this sector is a risk. Longer term, the taming of construction ‘monster’ will bring with it a slower rate of expansion.
Maturing wealth: Demand for branded luxury goods in China is showing signs of decline as tastes mature and ‘logo fatigue’ sets in. In Shanghai’s real estate market, big, bold and bling are still seen as desirable. In the longer term a demand for property that focuses on more authentically Chinese architecture may develop.
City-led policy: Chinese central government is allowing local government to play a bigger part in deciding city policy. We expect to see more of this as China tests the waters with economic reform.
Rio de Janeiro
The excitement of the World Cup is over, property markets wait for 2016 Olympic fever
The real estate market in Rio de Janeiro experienced stratospheric levels of price growth in the past decade (residential values increased by more than 200% since 2008 alone), fuelled by an expansion of the credit markets, growing middle classes, new employment and foreign investment. But this has slowed and government discontent is increasingly visible.
2020 vision
Social change: Brazil saw 40 million people join the middle classes between 2005 and 2011, bringing with them huge demand for products, services and real estate. The success of the next decade will depend on meeting the needs of this group and their demands on healthcare, education, city services and, importantly, housing. Crowded Rio is finding new development land in its pacified favelas, but at the expense of existing residents.
Infrastructure: With the World Cup over, Rio is looking to the Olympics in 2016. Accelerated infrastructure projects, which include a revitalisation of the city’s historic port district, extension of the metro system and sanitation improvements, will be a benefit.
Economy: Brazil continues to suffer inflation and stagnant growth. Rising interest rates will stretch affordability in the residential markets and limit price growth. However, substantial price falls would appear unlikely given strong credit control and low levels of mortgaged indebtedness.
Mumbai
Improved confidence in real estate markets stems recent price focus
Stability is returning to the Mumbai real estate market following May’s election. The Bharatiya Janata Party’s pro-development stance has brought solidity to the markets and eased uncertainty among the ex-pat community. This has translated into confidence in the real estate markets and modest price increases.
2020 vision
Supply: The Mumbai market has been characterised by high levels of new supply in recent years. We anticipate a rebalancing as occupier demand picks up with an improving economic outlook.
Infrastructure: The first phase of the Mumbai metro opened in June 2014 and carried 18.5 million passengers in its first two months. When complete, the system will comprise three high-capacity metro railway lines, spanning a total of 63km. The scheme has the potential to change the dynamics of real estate in the city, and there has already been an impact on prices in neighbourhoods that will benefit from improved connectivity.
Market liberalisation: The government is attempting to make India a more appealing investment destination. Limits on foreign investment in some sectors are to be lifted, while privatisation of state-held companies may be on the cards. The Indian finance ministry may introduce a regulatory framework to enable REITs to be listed in India. This would bring a new wave of capital into commercial real estate markets.