It’s the old world ver­sus new in world class city rank­ings

Yorkshire Post - Property - - PROPERTY - Sharon Dale

THERE are ten world cities in a class of their own when it comes to res­i­den­tial real es­tate, ac­cord­ing to new re­search by Sav­ills.

The new ‘“World Class In­dex” of premier global res­i­den­tial prop­erty lo­ca­tions re­veals av­er­age val­ues across the in­dex have risen by 77 per cent since De­cem­ber 2005, de­spite the in­ter­ven­ing fi­nan­cial cri­sis.

Growth of six per cent was seen in the first six months of 2011 but, says Sav­ills Re­search, the in­dex av­er­age hides a big dif­fer­ence be­tween emerg­ing “new world’”economies and the in­debted “old world”.

A clear gap can be seen be­tween what might be called the “old” economies of Tokyo, Lon­don, Paris, Syd­ney and New York (which grew by 32 per cent since 2005) and the “new”, or emerged, economies of Shang­hai, Sin­ga­pore, Hong Kong, Moscow and Mum­bai which grew, on av­er­age, by 123 per cent over the same pe­riod. Within the “old world”, the more cos­mopoli­tan cities have fared much bet­ter than those that re­strict for­eign pur­chasers.

“It be­comes ap­par­ent that the debt-in­duced cri­sis of 2008 was suf­fered most by the ‘old world’ cities and not the ‘new world’ ones,” says Yolande Barnes, head of Sav­ills Res­i­den­tial Re­search.

“The big­gest ‘old world’ value re­bounds have been ex­pe­ri­enced in the cities most open to new world in­vest­ment, no­tably Lon­don and Paris.”

A shift has oc­curred in the global real es­tate premier league in the last six years.

Hong Kong re­mains the most ex­pen­sive and val­ues are now 107 per cent above the 10 cities in­dex av­er­age, and 63 per cent more ex­pen­sive than sec­ond place Lon­don, which is grouped along­side Tokyo, Sin­ga­pore and Paris.

Sin­ga­pore has seen growth over the last five and a half years at 123 per cent, so it has come up the ranks from sev­enth po­si­tion in 2005 to fourth in 2011.

“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 per cent less than the av­er­age of all the 10 cities. But it is the great pre­tender hav­ing grown by 154 per cent off this low base, and record­ing the high­est rate of growth over the pe­riod, (marginally ahead of Shang­hai’s 143 per cent).

On an in­di­vid­ual ba­sis, cities have per­formed very dif­fer­ently. Against Mum­bai, Sin­ga­pore and Shang­hai’s stel­lar growth, New York grew by just seven per cent and now along with Syd­ney rep­re­sents the best value by a con­sid­er­able amount in the “old world”.

Visi­tor busi­ness and re­lo­ca­tion ac­tiv­ity in each city is re­vealed in Sav­ills In­ter­na­tional rental rank­ings. These show that of the 10 cities, Lon­don has the high­est rents and Mum­bai the low­est.

For the top five most ex­pen­sive rental cities namely Lon­don, Paris, Hong Kong, Tokyo and Sin­ga­pore, de­mand is fu­elled by do­mes­tic, as well as cor­po­rate de­mand as would-be pur­chasers are pushed into the rental sec­tor due to credit re­stric­tions. Rents have moved, on av­er­age, across all cities at a slower pace than cap­i­tal val­ues, thereby sup­press­ing yields.

“In­creas­ingly, our cities have more in com­mon with each other than with the do­mes­tic, main­stream mar­kets in which they op­er­ate,” Yolande Barnes says. “Their fu­ture per­for­mance will de­pend upon their con­tin­ued ap­peal as places to live and work as well as to in­vest. 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.”

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