Investment in urban land is on the rise – we need to know who owns our cities
By Saskia Sassen – August 6, 2016
The term “gentrification” does not quite capture the massive changes that have been happening in a growing number of cities worldwide in the last few years. In mid-2014 to 2015 alone, more than a trillion dollars was invested in real estate, in just 100 cities across North America, Europe and Asia; this is excluding properties priced under US$5m and sites available for development.
Something else is happening. Urban land – not just buildings, but also undeveloped lots – is considered a good investment at a time when financial markets are shaky. As a result, worldwide investment in urban land is increasing rapidly.
There are diverse indications of this, which I explore in depth in my book, Expulsions. For one, the top 100 cities – as ranked by level of property investment – account for 10% of the world population, but 30% of the world’s GDP (its overall economic output) and 76% of the world’s property investment. So wealth is clearly being concentrated into a select group of urban areas.
Another disturbing sign is that worldwide real estate assets amount to US$217 trillion, according to Savill (one of the leading expert firms on real estate). This represents 60% of the value of all global assets, including equities, bonds and gold. And let’s not forget that when a piece of real estate becomes an asset, it has been financialised – which opens up all kinds of possibilities to raise the property’s value.
That said, it’s important to keep things in perspective. Although the world’s GDP is about US$270 trillion, this is dwarfed by the value of finance: measured by outstanding derivatives (the basic measure for finance), it is worth over a quadrillion dollars…