Emerging markets around the world, including India, Mexico, Vietnam, South Africa, Malaysia, and CEE countries, are set to see an increase in real estate investment, as rising allocations and the superior returns performance of real estate in these economies drive inflows.
In its Impacts thought leadership programme, Savills says that, while relatively small, the proportion of global institutions investing in emerging markets has begun to tick up to allocate approximately $75 billion annually after a pandemic-related dip as total unlevered real estate returns since 2020 have averaged around 6% per annum (unweighted) in these markets, according to MSCI, compared to 3.5% for the MSCI Global Property Index.
Savills says, based on its analysis of both institutional and economic drivers, including GDP, GDP per capita and an index of property rights protection, India, Mexico, Vietnam, South Africa, Malaysia, and Central and Eastern European countries could be beneficiaries of this capital. According to the international real estate advisor, these countries are often under-invested relative to other asset classes, providing opportunities to deliver excess returns in markets that deliver a combination of economic growth and relatively transparent and stable institutions.
Oliver Salmon, Director – Capital Markets, Savills World Research, says: “15-20 years ago, real estate investment activity across emerging markets was diversified, however the rapid growth and integration of the Chinese economy absorbed much of the capital allocated to this group, crowding out other geographies. Today, however, with the structural challenges now facing the Chinese domestic property sector, global investors in emerging markets are likely to look for opportunities elsewhere and are seeing the attractions of locations that can offer better than average returns in resilient environment.”