_Future view – global prime property trends in 2017

Selecting headline risks and opportunities from the deluge of issues facing the world’s prime residential markets in 2017 is a challenge. Geopolitical currents from Europe, the US and China are inescapable – but so too are the more intangible lifestyle and social shifts that are influencing how people use property.

Politics is everything

Brexit and Trump took many by surprise. The same will not be true in 2017; investors are now well aware that anything is possible when voters are called to the ballot box. Elections in the Netherlands, France and Germany will have many looking to stay ahead of unfavourable results, with money on the move to safe havens. European political risks will weigh on southern European markets as investors look to protect themselves from potential Eurozone turmoil. 

The American Empire

At a time when many G20 nations are still cutting interest rates and turning the quantitative easing tap, the US economy is strong enough to move towards normalising its monetary policy. A strong dollar will reinforce the spending power of America’s wealthy and persuade capital elsewhere in the world that it would be better off in US-based income-producing investments while exchange rates find their true levels. 

Capital controls in Asia and elsewhere will buckle in 2017 as market realities reassert themselves. Expect more inflows into US markets where investors will feel it is safer to sit out the storm amid the comparative calm of a growing American economy.

Don’t forget Asia 

The narrative surrounding China’s economy shifted from “opportunity” to “risk” after the financial crisis, as all the upbeat arguments about stellar wealth creation were replaced by angst over indebted local governments and state enterprises. 

The gloom is overdone: while the annual percentage growth rate may have fallen, in 2017, the IMF is forecasting Chinese GDP to reach US$12.4 trillion, more than twice the level recorded in 2010.

Asia has been through several years of readjustment, due to commodity price corrections and a shift away from export-driven growth towards a consumer-led economy.

In 2017, this will begin to pay dividends, as threats of Western protectionism recede and domestic consumption creates a more self-reliant Asia. 

The signs are that UHNWI Asian investors are set to expand their property investment requirements. 

Temporary space 

Geopolitical issues aside, the single biggest trend shaping investment patterns globally is digital disruption. 

To take a single example, Airbnb and similar sites have facilitated the growth of short-stay accommodation options just as fragmentation in the global economy is sending more employees “on the road”: the latest OECD data points to close to 20% year-on-year growth in international temporary assignments.

This process is set to be super-charged as firms move London-based staff around Europe – at least until there is greater clarity over Brexit.

City authorities are struggling to work out how to police this process, concerned over the impact both on the hotel sector and on full-time residents.

Expect investors to focus on these emerging sectors – with the world’s leading cities the main investment targets.