A G LO B A L P E R S P E C T I V E O N P R I M E R E S I D E N T I A L P R O P E R T Y A N D W E A LT HTHE DEfINITIVE PRIM...
KNIGHT FRANK TERMS AND DEFINITIONSHNWI	is	an	acronym	for	high-net-worth	individual’,	a	person	whose	investible	assets,	exc...
}CONTENTS                                                                                                                 ...
THE WEALTH REPORTPROPERTY Knight FranKPrime internationalresidential indexGLOBAL                                          ...
THE WEALTH REPORTPROPERTY Knight FranKPrime internationalresidential index                                                ...
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
The Wealth Report 2010
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The Wealth Report 2010

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A GLOBAL PERSPECTIVE ON PRIME RESIDENTIAL PROPERTY AND WEALTH.

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The Wealth Report 2010

  1. 1. A G LO B A L P E R S P E C T I V E O N P R I M E R E S I D E N T I A L P R O P E R T Y A N D W E A LT HTHE DEfINITIVE PRIME RESIDENTIAL BRIEfING NEW HIGH fOR CONTEMPORARY ARTTHE WORLD’S MOST INfLuENTIAL CITIES ASIA PACIfIC PRIME REAL ESTATE OuTLOOkfOCuS ON PROPERTY MARkET INVESTMENT WHERE THE WEALTHY ARE INVESTING
  2. 2. KNIGHT FRANK TERMS AND DEFINITIONSHNWI is an acronym for high-net-worth individual’, a person whose investible assets, excluding their principal residence, total between $1m and $10m. An UHNWI (ultra-high-net-worth individual) is a person whose investible assets, excluding their primary residence, are valued at between $10m and $100m-plus.The term ‘prime property’ equates to the most desirable, and normally most expensive, property in a defined location. Commonly, but not exclusively, prime property markets are areas where demand has a significant international bias.Exchange rates: unless otherwise stated these were calculated using the rate on Feb 1 2010. The Wealth Report 2010 Attitudes Survey: the participants of the survey comprised clients of Citi Private Bank. Survey conducted between 1 December 2009 and 31 January 2010. CONTRIBUTORS Prime, prestige, luxury – all labels applied to the top end of the residential propertyWritten and edited by Andrew Shirley and Liam Bailey, Knight Frank LLP . For research and press enquiries: Liam Bailey, Knight Frank LLP , market in different parts of the world.55 Baker Street, London W1U 8AN +44 (0)20 7861 5133 ANDREW SHIRLEY A ndrew, when not editing While the names may differ, the desire of High¯Net¯Worth Individuals to own The Wealth Report 2010, is head of and invest in the best property is ubiquitous around the globe. As we discover in rural property research at Knight Frank. THE WEALTH REPORT 2010 For this issue he interviewed Trudie our focus on prime property in Asia Pacific (page 18), even the world’s smallestContent and editing: Knight Frank Styler about the Italian estate where emerging economies, such as Cambodia, are promoting themselves as developmentWealth Report Editor – Andrew ShirleyEditor at large and head of research content – Liam Bailey she and husband Sting are creating hotspots and attracting growing amounts of internal and external investment. their own wine.Marketing and PR The tangible and straightforward nature of residential property, especially whenFor Knight Frank – Rebecca Maher PAGE 44For Citi Private Bank – Pauline Loohuis the outlook for other asset classes is uncertain, explains this attraction. The resultsDesign and art direction: Smith & Milton LIAM BAILEY of The Wealth Report’s 2010 Attitudes Survey (page 40) clearly indicate thatStrategic Director – David Haseler L iam is The Wealth Report’s “editor Creative Director – Steven Anderson at large” and also heads up Knight HNWIs, wherever they are around the world, still see property as one of the bestSenior Designer – Andy IsaacAccount Manager – Mark Mobbs Frank’s residential research team. assets to own, with most predicting values to grow in 2010.Production Manager – Kevin OBrien He likes to take a global view and in this issue reviews the market for Furthermore, property is viewed as a strategic investment that can ride outPrinting:Murray Arbiter at Quadracolour Limited prime residential property around economic cycles. Most of the survey’s respondents said they were interested inFront and back cover image: the world. long¯term capital growth from their property portfolios, rather than income.Photographed by Duncan Kendal PAGE 6With special thanks to Bentleys of London Despite this globalisation of property as the “must¯have” asset class, it wouldPhotography: SEBASTIAN DOVEY still be wrong to talk about the marketplace for the world’s most desirable propertiesJames Day, Joachim Ladefoged, Sanna Kannisto, Ross Honeysett S ebastian is head of Scorpio as a single entity. Just as the labels vary, so do the characteristics of individual Partnership, which specialises in advising the wealth management markets, not only between continents and countries, but also from city to city industry. For The Wealth Report and region to region. 2010 he looks at wealth patterns around the world. Each market – as highlighted by the latest results from our Prime International PAGE 28 Residential Index (page 6) – sits in a different part of the economic cycle. Some are booming to the point where overheating is once again a concern, while others IAN BREMMER A leading authority on political risk are still struggling to shake off the impact of the global recession. and head of Eurasia Group, Ian offers Market drivers are also becoming more nuanced in the light of varying Wealth Report readers his perspective government responses to the credit crunch. Cities like Washington DC and Beijing, on the factors shaping the world’s political landscape in 2010. as The Wealth Report 2010 Global Cities Survey (page 34) discusses, now find PAGE 30 themselves transformed into banking as well as policy hubs, attracting a new breed of property owner. JONATHAN FENBY C hina expert and co-founder of The last decade witnessed huge shifts in the global property market with many respected emerging economies new opportunities emerging. The next 10 years are likely to see even more changes. analyst Trusted Sources, Jonathan looks at Beijing’s Luxury, prime or prestige – however you like to describe them – The Wealth changing global role as the Report 2010 offers a unique and invaluable insight into the world’s most valuable nation’s economic power property markets.© Knight Frank LLP 2010 continues to grow. This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections PAGE 38presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank to the form and content within which it appears. ADRIAN WOOLDRIDGEKnight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names. A s The Economist’s former Washington bureau chief, Adrian The Wealth Report is provided as a service to clients of Citi Private Bank. The views expressed herein are those of Knight Frank LLP and associates, and do not necessarily reflect the views of Citi Private Bank, has experienced the unique nature Citigroup Inc., Citigroup Global Markets Inc., and its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the of the US’s capital city. He shares purchase or sale of any security. Past performance is no guarantee of future results.Citi Private Bank” is a business of Citigroup Inc., which provides its clients access to a broad array of products and services available through bank and non-bank affiliates. Not all products and services are his insight in the latest edition of Andrew Shirleyprovided by all affiliates or are available at all locations. In the U.S., brokerage products and services are provided by Citigroup Global Markets Inc. (“CGMI”), member SIPC. GGMI and Citibank, N.A are affiliated companies under the common control of Citigroup. Outside the U.S., brokerage products and services are provided by other Citigroup affiliates. In the United Kingdom, Citibank N.A., London branch our Global Cities Survey. Editor ofand Citibank International plc, Canada Square, Canary Wharf, London E14 5LB, are authorized and regulated by the Financial Services Authority. The contact number for Citibank N.A. London branch and Citibank International plc in the United Kingdom is +44 (0)20 7508 8000. In Jersey, this document is communicated by Citibank N.A., Jersey Branch which has its registered address at PO Box 104, 38 PAGE 39 The Wealth Report 2010Esplanade, St Helier, Jersey JE4 8QB. Citibank N.A., Jersey Branch is regulated by the Jersey Financial Services Commission to conduct deposit taking business under the Banking Business (Jersey) Law 1991 and investment business under the Financial Services (Jersey) Law 1998. Citibank N.A., Jersey Branch is a member of the Depositors Compensation Scheme as set out in the Banking (Depositors Compensation) (Jersey) Regulations 2009. Further details of the scheme are available on request. 3 |Citi, and Citi with the arc design are registered service marks of Citigroup or its affiliates.©2010 Citigroup. All rights reserved.
  3. 3. }CONTENTS THE WEALTH REPORT CANADA 216,000 UNITED KINGOM GERMANY JAPAN MONITOR -19% 439,000 342,000 669,000 NETHERLANDS -9% -21% -12% 100,000 RUSSIA FRANCE -22% 101,000 ITALY BELGIUM -23% 266,000 28 46,000 232,000 UNITED STATES -14% -23% -18% CHINA ISRAEL SPAIN 7 000 } -12% 343,000 SWITZERLAND 2,519,000 97,000 18% -11% 165,000 IND A HONG KONG -19% SPREAD THE -13% 85,000 72,000 PORTUGAL -24% 23% MEXICO COLOMBIA 13,000 UAE SINGAPORE -24% WEALTH 130,000 20,000THE WEALTH REPORT 21,000 -4% -2% BRAZ L -2% 58,000 INDONES A -22% CHILE 19,000 AUSTRALIA 181,000 SOUTH AFRICA -16% 30,000 -9%PROPERTY Where the worlds wealthy live 2% 96,000 146,000 - 1% -20% ARGENTINA 49,000 now and where future wealth will be based 13%6 30GLOBAL VIEW GLOBAL WEALTHKnight Franks latest research on the performance of prime RISKS Exclusive analysis for residential property markets The Wealth Report 2010 from Eurasia Groups Ian Bremmer12METAMORPHOSIS 34Investors return to the property THE NEWinvestment arena POWER BROKERS Knight Franks authoritative guide 17 to the worlds most influential citiesISLAMICFINANCINGWhy Sharia compliant investments are on the up18 THE WEALTH REPORT } ATTITUDESASIA PACIFICIN BLOOMThe regions key property markets and economies in focus 40 SMART MONEY The Wealth Reports unique survey of HNWI attitudes to THE WEALTH REPORT property and wealthTRENDS 44 } TRUDIE STYLER26 Exclusive interview with Trudie ART FOLLOWS Styler about the Italian estate she shares with husband StingCOMMERCEThe contemporary art market bounces back to a record high KNIGHTFRANK.COMCITIPRIVATEBANK.COM 5 |
  4. 4. THE WEALTH REPORTPROPERTY Knight FranKPrime internationalresidential indexGLOBAL Three years into the global housing market downturn, and at the tail end of the world’s worst recession for 70 years, we might have expected to see the beginning of a slow and measured property recovery. Instead, on the VIEW one hand, we have strong growth in London and huge uplifts in key Asian markets.On the other, prices were still falling last year in three-quarters of the locations featured in our Prime International Residential Index. Liam Bailey explores this ongoing paradoxHow we track tHe world’s markets… China – almost inevitably – dominates the top of demand is quick to re-establish itself with Algarve -30% and Dublin -25%), the Caribbean our table. In Shanghai prices rose by over 50% last buyers and investors looking to capitalise on (Barbados -20%), the Americas (New York -12.5% the knight Frank Prime International residential Index (PIrI) year with Beijing close behind. Local commentators the better value offered. At the same time supply and San Francisco -16%) and even some locations is the most comprehensive analysis of global luxury residential markets. are convinced that price growth at this rate is not becomes constrained as development schemes in Asia Pacific (Kuala Lumpur -1.8%), the downturn Our index is compiled using data supplied by our global network. necessarily a bubble in the making – pointing to are put on hold during the initial stages of the went truly global in 2009. some pretty compelling market fundamentals, market downturn. In most locations, however, looking at annual All annual price growth figures relate to the 12 months to the end which we discuss below. Away from these growth markets, the price growth figures does not tell the complete story. The of December 2009. Over the past 12 months we have seen a great falls that began in 2007 were, by 2009, afflicting vast majority of price falls took place in the first half, Prime property is the most desirable, and normally most expensive, reversal of fortune – the worst performers in 2008, a wider range of global markets. In last year’s if not the first quarter of the year. In New York, for property in a defined location. Commonly, but not exclusively, prime led by Hong Kong (which has moved from 55 to 3 report we revealed that 41% of the prime markets example, prices fell more than 12% in 2009, but in our ranking), Singapore (51 to 5), and London we tracked had seen annual price falls; this year actually rose by 2% in the final six months of the property markets will be areas where demand has a significant (53 to 9), were last year’s best. the figure is 73%. year. Markets recovered on the back of improved international bias. These markets have all confirmed the attraction With prices falling in the Middle East (Dubai confidence and the return of global economic growth. of prime residential property. When prices fall, -45% and Abu Dhabi -10%), Europe (Western KNIGHTFRANK.COMCITIPRIVATEBANK.COM 7 }
  5. 5. THE WEALTH REPORTPROPERTY Knight FranKPrime internationalresidential index An interesting divergence in performance can be PRIME PROPERTY PRICES IN seen when we split our results by location type. KEY GLOBAL CITIES, Q4 2009 On an unweighted basis prices fell by around 5% LOCATION FROM TO FROM TOTHE KNIGHT FRANK PRIME 1 PRICE in 2009 in the 56 prime markets we track. Coastal US$ Sq FT € Sq MINTERNATIONAL RESIDENTIAL CHANGE and country second home locations saw prices MONACO 4,300 5,900 36,000 44,000 2INDEx RESULTS FOR AbOVE 40% fall by 14% and 11.9%, respectively. European LONDON 3,600 4,400 26,900 32,900 THE 12 MONTHS TO 1. SHANGHAI* 2. bEIjING* 52.0% 47.0% ski resorts were slightly more resilient – falling by PARIS HONG KONG 2,400 2,000 3,300 2,500 20,300 15,000 24,800 18,800 DECEMBER 2009 3 3. HONG KONG 40.5% 12%. But prime city locations were much healthier, ROME 1,800 2,500 15,000 18,500 posting an average rise of 0.4% over the year. GENEVA 1,800 2,500 15,000 18,500 bETWEEN 10% AND 20% MOSCOW 1,700 2,400 14,000 17,700 The market recovery in the cities at the top SYDNEY 1,700 2,300 14,000 17,100 4. jOHANNESbURG 17.0% 5. SINGAPORE 17.0% of our table shows renewed confidence in the TOKYO 1,600 2,200 13,800 16,900 6. jAKARTA 14.0% performance of prime property, which is welcome, MANHATTAN (NEW YORK) 1,500 2,100 12,600 15,400 7. MUMbAI 11.0% SINGAPORE 1,500 2,000 12,600 15,100 but there is a degree of concern around the speed MUMbAI 1,200 1,400 9,300 11,300 8. RIO DE jANEIRO 10.0% and strength of the turnaround. The case for prime SHANGHAI 500 700 4,000 5,300 5 4 bETWEEN 0% AND 9% market outperformance, which we outline above, SOURCE: KNIGHT FRANK RESEARCH 9. LONDON 6.1% 6 is well made – but there are other factors at play. 10. WASHINGTON DC 5.6% 11. SAO PAULO 5.6% We have to consider the current support for 8 7 12. bANGKOK 4.6% market growth created by ultra cheap money. In fact In other, more mature, markets there are questions Future considerations 13. CAPE TOWN 4.3% 9 12 11 it is not just property markets that have succumbed regarding the sustainability of booming price growth. 14. HOME COUNTIES (UK) 1.4% 13 to exuberance – equities and commodities saw In Hong Kong, for instance, the market grew Last year we posed a question: was the downturn 10 15. ZURICH 0.0% 15 14 IN GROWTH 0 5 10 15 20 25 30 35 40 45 50 (%) prices pushed up sharply during 2009. strongly in 2009 on the back of a low interest-rate leading to a simple re-pricing of assets that had Rock-bottom interest rates and the “creation” environment and an influx of capital and lending become overvalued, or something more fundamental of money via government stimulus packages from the banks. All sectors saw an improvement. occurring in the global economy that would mean IN DECLINE (%) -50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0 have led to an injection of liquidity into the world The HK$10m+ sector, in particular, benefited prime market pricing would be further suppressed 27 19 16 17 1824 26 PRICE economy, which has found, inevitably, its way into from a 44% growth in transaction volumes to and take a long time to recover? 20 25 41 CHANGE 28 23 asset markets, including property, gold and shares. more than 6,700. To provide an answer we pointed to the emerging 29 21 22 40 MINUS 0% TO 9% 42 30 34 51 Low interest costs have protected potentially evidence in London – a city at the epicentre of the 35 31 32 33 16. TORONTO -0.5% distressed owners and reduced the supply of downturn – where we were beginning to see wealthy 43 36 37 38 39 49 50 17. SYDNEY -0.5% Government intervention 44 48 18. KUALA LUMPUR -1.8% property for sale. At the same time, low savings buyers return to the market. 45 47 19. ITALIAN LAKES -6.1% 46 rates have encouraged the wealthy to move We suggested that while no market could 52 20. MOSCOW -6.3% In light of this strong growth, the Hong Kong 53 21. CAP FERRAT -7.5% investments out of cash and into property in escape a bubble-and-bust scenario, the evidence government has threatened measures to restrict the 22. VALbONNE -7.5% the search for acceptable yields. This has driven was building that when the market believed that 54 23. ST TROPEZ -7.5% market – notably through mortgage lending restraint, demand for property higher and, set against tight prices had returned to offering good value, activity 24. CENTRAL ALGARVE -7.5% reducing, for example, the mortgage limit for luxury 55 25. VAL DISERE -8.0% supply, has served to push values upwards in would rise and the perennial factors that made a property from 70% to 60%. Despite these potential 26. ST PETERSbURG -8.9% many locations. prime market desirable would endure. Namely, restrictions the market continues to grow. Ironically, the unintended consequence of limited supply, the growth of demand in line with MINUS 10% TO 14% This example points to an interesting 27. CAYMAN ISLANDS -10.0% government economic stimulus packages has the expansion of global wealth and the clustering development. The crippling impact of property 28. GENEVA -10.0% been to support demand and pricing in top-end of the wealthy in established markets. 29. AbU DHAbI -10.0% bubbles bursting in Europe and the US has created 56 residential markets – probably not something This is exactly what happened. Supply fell in 30. MEGEVE -10.0% a much more confidently interventionist approach 31. CANNES -10.0% governments would readily admit to. London and also in countless other markets where in China, Hong Kong and Singapore (where cooling 32. PROVENCE -10.0% We ought not, however, to be too pessimistic. affluent owners or top-end property developers 33. MUSTIqUE -10.0% measures were introduced in September last year) The fundamentals in developing markets that we decided to refrain from selling at new lower prices. 2009 RESULTS BY ASIA PACIFIC 17.1% AFRICA 10.7% 34. THE HAMPTONS -11.0% discuss in more detail in our Asia Pacific Focus among other markets. Demand then rose as buyers looked hopefully, but WORLD REGION SOUTH AMERICA 7.8% 35. 36. PARIS LOS ANGELES -12.0% -12.1% are very impressive. The scale of demand in China, There is a slightly troubling aspect to this. often in vain, to secure stock at bargain prices. As UNWEIGHTED ANNUAL % CHANGE With governments brooding in the shadows, ready 37. COURCHEVEL -12.4% -7.7% NORTH AMERICA for example, confirms the need for new housing we have seen, those markets that appeared to be -12.0% EUROPE 38. TOKYO** -12.5% to burst incipient bubbles as soon as they emerge, 39. MANHATTAN in the Asian powerhouse economies – 8.5m new on the verge of collapse a year ago have bounced -13.3% CARIbbEAN (NEW YORK) -12.5% a high degree of skill is assumed from policy -27.5% MIDDLE EAST homes were sold in China in 2009, compared back from the ravages of the credit crunch. 40. MERIbEL -12.6% makers. The ability of markets to justify current 41. UMbRIA -14.0% with about 500,000 in the US. The issue for 2010 is how secure the renewed pricing depends to a large degree on continued -5.5% GLObAL Talking to Quek Kwang Meng, head of Asia bounce in pricing is in the markets at the top of MINUS 15% TO 20% credit availability. The security of pricing in these Pacific real estate investments for Citi Private Bank, our table. Our view is that most prime markets 42. MONACO -15.0% markets is yet to be tested. If banks were to restrict 2009 RESULTS BY CITY 0.4% 43. SAN FRANCISCO -15.7% the power of this dynamic is reinforced. Quek liquidity or to push up the costs of finance there are suffering from an undersupply of stock and this LOCATION TYPE -11.9% COUNTRY SECOND HOMES 44. 45. TUSCANY KIEV -16.0% -16.0% says that even if economic growth slows, rural is an obvious risk of a correction. will help maintain prices in the short term. Looking UNWEIGHTED ANNUAL % CHANGE -12.0% SKI migration is likely to swell China’s urban areas further ahead, however, it is those locations that offer 46. CHAMONIx -17.0% This more aggressive government stance -13.9% COASTAL SECOND HOMES 47. GASCONY -17.0% by 200m people within 15 years. a genuine lifestyle attraction to the world’s wealthy, is not limited to Asia. From Europe to the US, 48. MALLORCA -17.0% In India the requirement for accommodation rather than just an investment opportunity, that will -5.5% ALL 49. FLORENCE -18.0% governments have been making more active use is growing as rapidly as in China. Despite strong prove most sustainable. 50. bORDEAUx -18.1% of the economic tools at their disposal and as a 51. DORDOGNE -19.5% price growth (Mumbai +11% in 2009) the market by-product of bailing out banks in 2008 they have 52. bARbADOS -20.0% appears at little risk of overheating. The proportion ACKNOWLEDGEMENTS considerable influence over lending policies. We All data Knight Frank research except: of mortgage debt to GDP , which has hit 70% and MINUS 21% TO 50% can expect to see more, not less, public sector MANHATTAN, THE HAMPTONS Prudential Douglas Elliman and Miller Samuel Inc 53. PALMA -22.0% more in countries in the developed world, still sits TOKYO Colliers Halifax control, at least over the short and medium term. TORONTO Harvey Kalles Real Estate Ltd WASHINGTON DC Evers & Co 54. DUbLIN -25.0% at around 10% in India – despite a quadrupling in LOS ANGELES, SAN FRANCISCO First Republic Prestige Home Index 55. WESTERN ALGARVE -30.0% the size of this mortgage market in a single decade. 56. DUbAI -45.0% } FOOTNOTES 9 *bEIjING & SHANGHAI Based on urban areas only KNIGHTFRANK.COM **TOKYO Change based on land values, latest data July 2009CITIPRIVATEBANK.COM

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