What is facing the global real estate market in 2018?

04 January 2018

By Russell Field | 27 December 2017

With 2017 having been the most active year since 2007 in terms of global IPOs, we look towards the new year and consider the prospects for capital markets from a real estate perspective.

In the UK, capital markets have been very active this year, with BDO working on 17 IPOs overall on AIM and the main market, five of which were in the real estate sector. Indeed, a total of £1.2 billion was raised on AIM and main market REIT transactions in 2017 – and that is just for transactions for which BDO was the reporting accountant. But looking ahead to 2018, it seems there is a pause in market activity and possibly limited opportunities for real estate companies looking to enter the market.

Similarly, in the US, we are starting to notice some hesitancy in the market, with some IPOs even being pulled. Uncertainty in Washington, and surrounding corporate taxes, may trigger increased stagnation in the market.

Conversely, capital markets in Madrid are doing extremely well and 2018 looks to be a bumper year for IPOs in Real Estate. Unlike in the UK, we predict that a significant number of residential developers will enter the Spanish market next year. In the same vein, the real estate market in the UAE is growing, with a number of assets already active. As the real estate market matures and becomes more structured in 2018, we are likely to see the number of lower-cost projects increase.

Market activity in Spain is drawing strong interest from international investors and will continue to do so in the new year. Likewise, Dutch markets have attracted significant foreign investment. Meanwhile, in the Netherlands, a worsening housing shortage, which is set to peak in 2018, has driven up interest in the Dutch housing market and new developments have increased in value. Investment in the Dutch healthcare sector continues to grow rapidly: with the ageing population on a predicted upwards spike for the years leading up to 2022, there is huge demand for properties that provide care facilities for, or otherwise meet the requirements of, the elderly.

The US infrastructure projects expected for 2017 have not materialised but expectations are high for 2018. These projects will demand big spending, resulting in a lot of money being channelled into the US construction industry. Meanwhile, however, existing infrastructure continues to age. Similarly, US retail properties are suffering, many sitting empty; the race will continue in 2018 to reconfigure these spaces.

Globally, real estate markets are being impacted by numerous different social and economic influences – from housing crises in the UK and in the Netherlands to political activity in the US. The result is real estate markets that are showing signs of slowing down. Yet in other countries, like Spain (especially Madrid), the real estate market is strong. But will oversupply in Spain tip the market from strong to stagnant? It will be interesting to see how these factors interconnect and fluctuate in the coming year.

Hizbullah Khan 

Manager – Assurance Services

+971 2 679 9361

hizbullah.khan@bdo.ae