Why real estate investors should follow global population trends

The best real estate investment in the world today? Beachfront huts in Somalia. That is according to Hans Rosling, a Swedish public health professor and data visualisation pioneer. A statistical geek is an unlikely source of property investment advice but Rosling’s rationale is convincing — and it is one that professional property developers such as Barratt and Klépierre are already putting into practice.

The explanation lies in demographics. All of the world’s forecast 3bn population growth through to 2100 will be urban, Rosling points out; a third will be in Asia, while two-thirds will be in Africa. In economic terms the developed west will grow at 1 to 2 per cent a year through until 2100, while the rest of the world will grow at 4 to 6 per cent. This amounts to a startling global shift in the pattern of trade.

“The Indian Ocean will be the Atlantic of the next generations,” predicts Rosling. As a result, the surf-beaten golden sands that stretch north from Mogadishu will make excellent holidaying territory for the Asian middle classes, several decades hence.

Somalia is a colourful example of an unlikely long-term real estate investment, but it is not the only one. As the world urbanises, it is throwing up a series of new opportunities for those willing to think a little more creatively about where to place their money.

“Particularly in Asia and the Middle East, cities are growing massively and investors are looking for alternatives to invest in,” says Mark Haefele, global chief investment officer at UBS Wealth Management. He references urban infrastructure, housing, food, water and sanitation as all being in great need of investors’ cash. As one example, he cites Asian investors who have begun to buy up Australian dairy farms.

“A lot of new cities need to be built and a lot of transport needs to be fixed and a lot of energy needs to be created,” says Rosling. He sees the greatest opportunities in people’s everyday lives. “The classic source of wealth is to fulfil the needs of ordinary families — housing, education, transport, entertainment — and that need is great in emerging markets,” he adds.

Perhaps the best example is Nigeria, which will be the world’s fastest growing country over the rest of this century, according to projections by the UN. By 2100 its population will have rocketed to nearly 1bn people, from less than 38m in 1950 and 184m today. This will make it the world’s third most populous country after India and China.

Property investment is not just about sheer numbers of people, though. Income levels are also important. The greatest growth in the middle classes is taking place in Asia. By 2030 there will be more than 3bn middle-class people in Asia, according to forecasts by the Brookings Institution, up from 525m today. India will be the world’s biggest consumer, with its middle class spending $12.8tn a year, the Brookings Institution forecasts.

Source: Financial Times, 2014, Full Article Here

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