Real estate investments will benefit in 2022 from historically low interest rates as well as developments in the global economy. The latter has recovered in most markets since the pandemic-related slump in 2020. That trend is going to continue. What's more: An unprecedented recovery will follow the recession. Experts are united on this point and are forecasting that growth for 2022 will be above the long-term trend.
Credit Suisse Research estimates that the global economy will grow by 3.6% in real terms this year. But Olafur Margeirsson (Global Research, Credit Suisse Asset Management) adds the following qualifier: "There are large regional differences in the growth dynamics." Real gross domestic product (GDP) growth in the US, for example, is projected to be 3.3%, which is significantly higher than the long-term local trend of 1.7%. In the euro zone, annual 2022 growth for France, Italy and Spain is predicted to range from 3.2% to 4.4%.
In Germany, growth is forecast to increase by 2.2%. And that in spite of the fact that the long-term national growth trend is only 1.1%. In the APAC region, China is the only large economy expected to record growth below trend in 2022. The reason being ongoing problems in the construction and real estate sector. Immediate risks to financial stability, however, should remain limited. In other countries of the region, such as Australia, experts expect historically high growth for the current year.
Real estate investment will benefit from this ongoing recovery. Olafur Margeirsson anticipates revenues in the mid single-digit percentage range: "In addition to the economic recovery, a number of other factors, such as low interest rates, speak in favor of sustainable returns for real estate investments."
Rising inflation was a key issue in 2021, and inflation was above 5% in many places. The war in Ukraine and rising energy prices have delayed inflation normalization. Global inflation is expected to persist at an elevated level of 5.9% in 2022. The real question is how central banks will respond. According to a December 2021 forecast from the US Federal Reserve, five to six interest rate hikes are expected by the end of 2022.
The European Central Bank is expected to leave interest rates in Europe unchanged through the end of 2022. Olafur Margeirsson remains confident: "Interest rate levels – particularly in Europe – are likely to rise only modestly, leaving attractive general conditions for real estate investments."