Global economic growth is projected to slow down despite the anticipated decrease in interest rates, according to Knight Frank’s latest wealth report. The report suggests that the global gross domestic product (GDP) is set to rise by 2.9% this year, a decline from the 3.1% growth seen in 2023.
One of the key factors contributing to this slowdown is the impact of higher interest rates, which are expected to continue to constrain spending. This trend is particularly evident in the United States, where consumers have depleted their Covid-era savings.
Moreover, governments around the world are facing challenges due to high levels of debt accumulated during the pandemic as a result of unsustainable spending.
Knight Frank predicts that interest rates will decrease in the coming year, although the extent of this decline remains uncertain. Factors such as an aging population, the green transition, and efforts in the West to disengage from Chinese supply chains will all play a role in shaping the economic landscape.
Despite these challenges, the real estate industry is poised for some positive developments. Lower property values and interest rates, paired with forced selling of property assets following market corrections in the previous year, are expected to lead to improved investment volumes in 2024.
The report also highlights the impact of AI on the property market, with a growing demand for data centers, specialized office spaces for collaborative research, and industrial real estate catering to AI development. AI-driven building management systems are set to enhance energy efficiency, climate control, and security standards in properties.
In light of increasing concerns around climate change, properties are likely to face higher insurance premiums, with insurance costs as a percentage of income rising significantly. Investors are urged to consider environmental factors as a key consideration in their investment decisions, as demand grows for properties located in low-risk areas and for energy-efficient buildings.
Overall, the global real estate sector is undergoing a period of significant transformation, driven by factors such as hybrid working, the green agenda, and evolving consumer trends. As investors navigate these changes, opportunities for growth and innovation are emerging, particularly in areas that prioritize sustainability and climate resilience.
