Top ten cities see 77% increase in property prices since 2005
[OVERSEAS PROPERTY PROFESSIONAL]
| August 9, 2011
International property agency Savills has published a list of what it believes are the top ten world cities in the world when it comes to investing in residential real estate.
These cities are in “a class of their own” says Savills in its World Class Index of premier overseas property markets, published this week, and they are London, Paris, New York, Shanghai, Singapore, Hong Kong, Moscow, Mumbai, Tokyo and Sydney.
The average property value in these world-class cities has increase by 77% since December 2005, says Savills, with things up 6% in the first six months of 2011. But a clear gap can be seen between what might be called the old economies of Tokyo, London, Paris, Sydney and New York, which have grown by 32% since 2005, and the new, or emerging economies of Shanghai, Singapore, Hong Kong, Moscow and Mumbai which grew, on average, by 123% over the same period, says Savills.
And “within the old world the more cosmopolitan cities have fared much better than those that restrict foreign purchasers.”
Yolande Barnes, head of Savills Residential Research, told OPP that “it becomes apparent that the debt-induced crisis of 2008 was suffered most by the old world cities and not the new world ones. The biggest old world value rebounds have been experienced in the cities most open to new world investment, notably London and Paris.”
Hong Kong now has the world’s most expensive homes and values there are 107% above the average of the top 10 cities index, and 63% more expensive than second place London, which is grouped alongside Tokyo, Singapore and Paris.
“With its strategic location in a time zone between Europe and North America, Hong Kong has emerged as one of the world’s elite financial centres, and as a gateway to China has prompted increased capital and talent inflow over the past decade,” says Simon Smith, head of Savills research in Asia Pacific.
At the other end of the scale, Mumbai is the least expensive world class city, costing 43% less than the average of all the 10 cities. But its home prices have grown by 154% from a low base in the past year.
Savills also monitors international rental rankings. These show that of the 10 cities, London has the highest rents and Mumbai the lowest.
Rents have increased at a slower pace than capital values across all of the cities in the list, thereby suppressing yields. The new world residential rental yields average is 3.6% and the old world is 5.1%.
“Increasingly, our cities have more in common with each other than with the domestic, mainstream markets in which they operate. Their future performance will depend upon their continued appeal as places to live and work as well as to invest,” said Barnes.
‘We anticipate that the efforts being made to cool the markets in some parts of the new world will take effect in the second half of 2011, so, although we expect their values to continue rising this year, it will be at a slightly more subdued rate. Meanwhile, old world cities like Tokyo and Sydney are geographically very well placed to benefit from investment from frustrated Chinese and other Far Eastern investors but they will need to open up their markets to such investors to trigger this.”
And, adds Barnes, “for wealthy, globally footloose investors, prime residential property in London and Paris will remain a favoured safe haven.”
