Institutional investors will increase their real estate allocation by £34.8bn in 2015, according to a Colliers International report.
The report, How long will this property bull market last?, found that institutional investors expected to increase their allocation to property from 9.4% in 2014 to 9.6% in 2015.
The increase was driven largely by cross-border investment, particularly from China and the Far East.
The report estimated that Asian investment overseas more than doubled from 13% of the market in 2007 to 30% in 2014, a rise of £23.9bn. The trend would continue into 2015, the report predicted.
In total, overseas real estate investment accounted for £173.8bn of the capital in the market in 2014.
The report highlighted that this investment came at a time when the market was experiencing an acute shortage of institutional-grade product that was driving up the cost of standing assets.
This was making development capital more widely available and with it financial products to help drive a new development phase, Colliers said.
The report also predicted that the current bull market for property investment would run to at least the beginning of rate hikes. This was estimated to be the end of 2015 in the US and as late as 2016-17 in the UK with 2020 more likely for the eurozone.
Walter Boettcher, EMEA research director and economist at Colliers, said: “Weight of capital as an investment driver is certainly not a new phenomenon, but remains undiminished in this particular cycle.
“However, what is new is the extent to which property investment has become globalised with funds needing to reach beyond their domestic borders to satisfy their target allocations to property. This is driven by the extraordinarily low interest rate environment and an international search for yield, with property offering relatively high returns compared to bonds and equities.”
Listen to an interview here with Walter Boettcher, EMEA research director and economist at Colliers, during MIPIM
