Real estate investing may not have been the number one topic of discussion at this year’s World Economic Forum in Davos, Switzerland, but with so many property tycoons in attendance, the topic was unavoidable. When it was discussed, however, almost everyone could agree on one real estate trend: markets are struggling all over the world… except for America.
A Global Slowdown
The widespread property problem can be felt acutely in China, which has used several tools in the past to build up its cities and increase demand for housing. Unfortunately, much of this strategy has failed, and the end result has been several ghost cities that are chock-full of large buildings but have little or no population.
These trends were behind Soho China Chief Executive Officer Zhang Xin’s statement that China’s push for urban growth is over. “I think the intense urbanisation has come to an end,” she said in a panel, adding that Chinese growth is going to suffer as a result. “With urbanisation coming to an end, it’s slowing down.”
Housing prices have already been in free-fall in China. Nationally, housing prices fell 4.3% in December and sales fell 7.6%. Many analysts are expecting further declines, with some proposing that the speculative housing bubble that burst in America may have already reached China’s shores, with similar pain to come.
An End to Urbanization
While China’s urbanization is threatened by a fall in growth, other speakers at Davos pointed to an IMF report that global productivity is falling and emerging markets could fall into recession. This lead many at the conference to worry that income inequality, an increasingly hot topic amongst economists globally, is going to get worse on a global scale.
The inability for the world’s poorest to improve their lot around the globe is going to impact the global real estate market, analysts say. The problem here is that many large fortunes in the emerging market depend on demand for more property, which increases demand for companies owned by the rich in emerging markets. Unlike in America, where technology and innovation drives the fortunes of the top 1%, the bank accounts of the rich in other countries are enriched by growing demand for basic infrastructure like telecommunications, concrete, land, and property construction. When the poorer populations in these countries are unable to make enough money to demand these goods and services, the real estate markets in those parts of the world begin to sputter out, even after two decades of breakneck productivity and growth.
The U.S. a Shining Beacon
This global mess cast a dark cloud over Davos, but there was one happy exception: the United States.
For instance, real estate billionaire Jeff Greene said at the conference that he is optimistic about the future of the U.S. economy, even while admitting that the labor market remained weak. Elsewhere at the conference, investors noted that most of the best cities for real estate investing are in the United States, including five on the West Coast. Los Angeles and San Francisco topped the list, while San Jose and San Diego also made an appearance
This is important because right now, multimillionaires and billionaires are speculating more aggressively than ever on growing real estate demand. Real estate developers can benefit if they play their cards right and get in on the real estate market now.
To do that, developers need capital, and that’s where firms like Socotra Capital come into the picture. With years of experience and dozens of deals already closed throughout California, we’re familiar with the real estate market and can help you get your next project off the ground quickly.
Your real estate assets are your best investments for the future. At Socotra Capital, we’re proud to be the premier direct hard money lender for California real estate. Contact us today to learn more about how we can help.
