SITTING DOWN WITH OUR CHIEF ECONOMIST, MARCI ROSSELL, PH.D. LP: What are your predictions for the global luxury real estate market in the coming year? MR: The Great Recession is long in the rearview mirror, and the affluent buyer is expecting a stronger global economy in the years ahead. With confidence in the economy comes security around income and asset values. So, the affluent buyer will continue to see real estate as a prudent, essential component in their investment portfolio. And despite the fact that interest rates are rising in the U. S., I expect 2017 to be a strong year of global luxury real estate. LP: How do you see these predictions reflecting on specific parts of the world? MR: The European Central Bank began its Quantitative Easing program two years ago, so I expect the positive results of that to hit the European market in the second half of 2017. We learned from the U.S. experience in 2009 and 2010 that it takes time for monetary stimulus to have an effect. The U.S. will probably grow at 3% in 2017, while Europe and Japan will expand at a slower pace, closer to 1%, but I expect the effects of quantitative easing by the European Central Bank and the Bank of Japan to come on strong in late 2017. LP: How do you see the real estate market impacting the global economy today? MR: Real estate matters to everyone. Buyers are confident when they feel their income is secure, regardless of where interest rates are headed. I think the underlying strength of the economy will be a bigger factor in 2017 than the Federal Reserve moves on interest rates. In the U.S., real estate accounts for about 30% of the net-worth of the wealthiest 20% of households and it makes up over 60% of the net worth of middle-income Americans. While movements in interest rates have some effect on the market, income matters more. LP: In 2016, Millennials overtook Baby Boomers, how do" you see this effecting the real estate market? MR: Boomers are entering the time in their lives when they are motivated by legacy buying. And Millennials are just now hitting their 30’s, when we can expect them to be fully engaged in their careers, getting their first bonuses, and nearing the end of their student loan payments. With that comes the first round of Millennial home buying. LP: What recommendations do you have for brokers on how they can talk to their clients? MR: Both Boomers and Millennials want prudent real estate investments, but for different reasons. Affluent Boomers are seeking legacy investments for their family that will be there for generations to come. The oldest Millennials are in their early 30’s and were heavily scarred by the Great Recession. Affluent Millennials appear to be more risk-adverse and sensitive to the possibility of income insecurity than prior generations. Luxury matters, but prudent, low-risk investments are very attractive to them. LP: Will we see more corporate growth in 2017 and if so how will this impact the real estate market? MR: The stock market rally in late 2016 suggests that investors are expecting a strong year for corporate America in 2017. Lower corporate taxes, deregulation and fiscal stimulus for the economy are all on the table this year. Real estate, being pro-cyclical, will also benefit from all these trends. LP: With global currency fluctuations and a stronger U.S. dollar will we see more people buying in the U.S.? MR: 2017 could be the time when U.S. buyers look outside their borders for attractive luxury properties and the value of a global network. The U.S. dollar has appreciated more than 20% since July 2014. For people whose wealth is held primarily in dollars, that’s like a double-digit return on their dollar-denominated assets in two years. U.S. buyers will certainly keep acquiring properties domestically, but because their dollars will buy more today than they would have a few years ago they may search abroad as well. MARCI ROSSELL, PH.D., Chief Economist for Leading Real Estate Companies of the World® As a former Chief Economist for CNBC and groundbreaking financial journalist, Rossell served in this position in the months immediately following September 11th. She is known for taking complex economic issues and making them relevant to people’s lives, families, and careers. Prior to her career in broadcast journalism, Rossell served as Corporate Economist and Investment Spokesperson for OppenheimerFunds, one of the nation’s largest mutual fund companies, and prior to that as an Economist with the Federal Reserve Bank of Dallas. Rossell earned a Ph.D. in economics from Southern Methodist University, where she was named one of the Young Alumni of the Year in 2002. She brings a world of experience----from Main Street to Wall Street when discussing the U.S. economy, international events, and movements in capital markets.
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