Factors Keeping the Property Market on the Boil

There are ten points which keep the property market on the boil.

1. Investment in infrastructure. Governments don't have enough funds to develop, modernise and maintain their roads, bridges, dams, sewers and other infrastructure. Global investors are beginning to invest in infrastructure as the returns on commercial properties fall.

"Infrastructure will quickly rival other property markets," says Reiss, " with trillions of dollars spent to bring infrastructure up to standard or to develop new infrastructure."

2. The US housing market is in decline. Loan defaults are rising this year and some home prices are drastically reduced. This could affect sentiment in other housing markets.

One of the most potentially damaging factors is stretched home buyers, says Reiss. Some banks in the UK, for instance, are giving loans of five times buyers' income.

3. Private equity property deals totalled US$160bn in 2006, which made real estate the second most active sector. "Private equity will continue to dominate the real-estate headlines this year," adds Reiss. Even before private equity giant Blackstone's $39bn acquisition of US-listed real estate investment trust Equity Office Properties earlier this year, the trend was overwhelmingly going from public to private and will spread to countries like SA.

4. The globalisation of real estate investment trusts (Reits) will create more Reits outside the US than in it for the first time in 2008, making global property investment easy and widespread.

More than 29 jurisdictions, including SA, are adopting the legislation necessary to start the development of Reits.

5. Green buildings, once dismissed by developers as too expensive, will become a must as tenants, lenders, residents and even investors push for sustainability. "Expect green principles to become synonymous in the real-estate industry with cost-efficient operating principles," says Reiss.

6. Hot property markets in Brazil, Russia, India and China will become established in the next few years, with strong flows of direct foreign capital. SA, Mexico, Romania and Turkey are moving up the list.

7. Cross-border capital flow will take off as investors step up the search for higher yields and new opportunities in previously untouched markets.

" Given the growing power of petrodollar economies, and the increasing sophistication of global data, we expect capital flows to become more complex over the next 10 years," says Reiss.

8. The power of demographics. India's booming population and rapid urbanisation are spurring housing construction. The wealth of call centre and technology services employees is creating a huge demand for retail.

The baby boom generation retiring at the rate of 10m/year in the US has also stimulated a boom in retirement communities for active retirees, and second-home developments. Similar trends are evident in Europe and Japan.

Populations of countries in Asia, Africa and the Middle East are getting younger and developers are focusing on creating housing and retail centres there.

9. The so-called café workforce. "Have you noticed the number of people using laptops in coffee shops?" asks Reiss. "They point to one of the biggest potential trends this year: the reduced need for office space."

10. Designing out obsolescence. Expect more developers to embrace building techniques that allow flexibility in the project to cater for different future needs of their users should the market change. In 50 years this trend may minimise the need for redevelopment on the scale we see today.