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Global real estate investment plunges 33% amid Covid pandemic

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The International Monetary Fund has forecast that global gross domestic product will shrink 4.9 per cent this year as the pandemic wears on.

[NEW YORK] Global real estate investment fell by 33 per cent in the first half as the coronavirus pandemic battered economies and disrupted deals.

The Asia-Pacific region took the biggest hit, with volumes down 45 per cent from the year-earlier period, because it was the first struck by the outbreak, according to a report from broker Savills Plc. Investment dropped by 36 per cent in the Americas and 19 per cent in Europe, the Middle East and Africa.

With the tourism industry shut down for months by government lockdowns, hotels saw investment decline by 59 per cent in the first half of the year, followed by a 41 per cent drop for retail properties, according to the Savills report. Industrial and residential properties fared better.

Investment is "expected to remain well below pre-pandemic levels for the rest of 2020 as investors wait for market clarity," Simon Hope, Savills head of global capital markets, said in a statement on Monday. "However, certain sectors are expected to outperform as investors focus on secure assets, namely logistics, residential and life sciences."

The International Monetary Fund has forecast that global gross domestic product will shrink 4.9 per cent this year as the pandemic wears on. IMF chief economist Gita Gopinath has said the cumulative loss for the world economy this year and next as a result of the recession is expected to reach US$12.5 trillion.

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Still, the investment decline was less severe than at the start of the last financial crisis in the first half of 2008, when investment cratered by 49 per cent and kept falling until the middle of 2009, Sophie Chick, director of Savills World Research team, said in the statement.

Among the few bright spots in the Savills report was a 105 per cent increase in Asian residential real estate investment, driven by Blackstone Group Inc.'s deal to buy a collection of Japanese apartments from Anbang Insurance Group for close to US$3 billion, according to the report.

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