The largest proportion of global wealth is held in the residential property market, and it’s been outperforming almost every other asset class.
Any budding investor weighing up their options may consider putting their money into bonds, funds, stocks, gold or even cryptocurrency, among other things, but it is the real estate market that not only has the highest level of investment globally, but has soared in value in the past three years.
The latest research published by Savills shows that the world’s property market was worth a huge £379.7trn as of the end of 2022, with more than three quarters of this to be found in residential property specifically. The sector alone was worth £287.6trn globally by the end of last year.
Further to this, the residential property sector saw a huge 21.1% leap in its value in the three-year period between 2019 and 2022, faring well through various factors that created market turbulence elsewhere, such as the Covid pandemic.
The only asset class to perform more strongly during the three-year time period was gold, which saw its value grow by 26.9%. However, as Savills points out: “The total value of gold is still dwarfed by the value of the real estate markets worldwide.”
Outperforming bonds and equities
Residential property across the globe “significantly” outperformed both bonds and equities over the last three years. Over the past year, the global value of equities has fallen by 20.3%, followed by agricultural land by 11.4% and debt securities by 3.2%.
Across the whole of the real estate sector – including both commercial and residential property – there has been an 18.7% hike in value over the past three years. Commercial real estate was slower to climb, though, with a 14.4% rise in value.
The most valuable real estate market, says Savills, remains China, as it makes up more than a quarter (26%) of the world’s total real estate value. Of course, it is also one of the most highly populated countries in the world, with 1.4 billion people and a vast amount of land space.
The US was the country with the second highest value real estate market, accounting for 19% of the total; but again, it is a large and highly populated country. After this, Japan came in third position, followed by Germany and then the UK.
Savills explains the balance: “Significant real estate wealth is concentrated in Europe and North America. The value of property in these two regions accounts for almost half (47%) of the total value worldwide, despite them being home to just 17% of the global population.
“Asia-Pacific (excluding China), by contrast, has 37% of the world’s population but accounts for only 17% of global real estate value.”
UK residential property hit £8.68trn in 2022
As of the end of 2022, Savills estimates that the total value of UK residential property was a record-high £8.68trn, having grown by 5.1% since the previous year. This comes off the back of accelerated house price growth over the past three years.
Lucian Cook, head of research at Savills, said: “The total value of all housing has risen by almost a quarter (+23%) since 2019, while outstanding mortgage debt went up by a lower +11%. So, while outstanding borrowing increased by £168bn, the growth in the total equity pot was well over nine times that figure at £1.46trn.”
The residential property market in the UK remains an extremely popular asset class among investors. It has continued to perform strongly throughout the past few years, in spite of some major shifts within the economy, and appetite remains strong despite rising mortgage rates.
Estate agency Hamptons recently released a forecast indicating that the market will return to growth from 2025, in what it deems to be the start of a new “property market cycle”, so the total value of UK residential property looks set to continue to climb.
