John Forbes, PwC real estate partner, told the 2012 Cambridge Real Estate Finance and Investment Conference that the global financial crisis means that the milestone could come sooner than expected. ‘Back in 2007, we predicted that the GDP of the leading emerging markets would surpass that of the leading advanced economies by 2050. The intervening global financial crisis has slowed growth overall, but the deceleration has been most marked in the advanced economies,’ he said. Real estate investors need to adapt as emerging markets start to dominate and China, the United States, India and Brazil are set to become the four major economies, it is claimed.
‘The shift in the balance of economic power is therefore happening more rapidly. We expect there to be three dominant economies by 2050 China, the United States and India. Then there will be a significant gap to the country that we expect to be in fourth place, Brazil,’ he explained. ‘We are already standing at a milestone. According to the latest data published by the International Monetary Fund in April, the share of world GDP of emerging and developing economies is expected to overtake that of advanced economies for the first time this year,’ he added.
Her told delegates that it is not a question of ‘if’ real estate investors will adapt to this changed landscape but ‘when’ and ‘how’. ‘Emerging market economies will be a major source of investment opportunities but also of capital. Real estate businesses need to address both. In terms of investing in emerging markets, investor concerns need to be considered,’ he pointed out. ‘The providers of capital have become increasingly attentive about a range of governance and transparency issues. This will be a major factor in determining which emerging market real estate businesses will attract international capital,’ he said.
‘Meeting the changing expectations of investors is a challenge for many real estate businesses even in advanced economies. Those in emerging markets are generally starting from a less developed point and for them the journey will be longer,’ he added.
