Savills - Insights - World Class Cities


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Savills - Insights - World Class Cities

  2. 2. KEY EMPIRE ORIENTAL STATE PEARL BUILDING TOWER EIFFEL MARINA TOWER BAY SANDS 2 SYDNEY LONDON BIG OPERA BEN HOUSE POPULATION 7.5M ST BASIL’S BANK AREA 607² MILES CATHEDRAL OF CHINA COST OF BUYING ASAKUSA RANKING 2 GATEWAY CAPITAL VALUE GROWTH KANNON OF INDIA TEMPLE DEC 05-DEC 10 27% DEC 10-JUL 11 4% COST OF BUYING 1 – 10 RANKING 7 NEW YORK CITY POPULATION 8.3M AREA 469² MILES COST OF BUYING RANKING 7 CAPITAL VALUE GROWTH DEC 05-DEC 10 10% 5 DEC 10-JUL 11 -2% PARIS POPULATION 6.6M AREA 294² MILES COST OF BUYING RANKING 5 CAPITAL VALUE GROWTH DEC 05-DEC 10 35% DEC 10-JUL 11 10% Welcome to Savills World Class index. that claim global status. Some rank top in Following the success of our Four Global terms of lifestyle, quality of life, places to do Cities Review in the Spring, we are now business,tax havens,cities of culture.Twenty reporting on 10 cities that all compete for six of the world’s cities are megacities, with real estate investment on the world stage. populations of over 10 million people.ILLUSTRATIONS ADAM POINTER These form our first World Class index of Although some of Savills World Class residential real estate price movements from cities are megacities and most rank highly 2005. There are many cities on this planet on the plethora of global measures, their - 02 - SAVILLS.COM
  3. 3. WORLD CITIES REVIEW 9 6 SHANGHAI POPULATION 22.5M 3 MOSCOW AREA 1125² MILES POPULATION 10.5M COST OF BUYING RANKING 6 TOKYO AREA 417² MILES CAPITAL VALUE GROWTH POPULATION 13.0M COST OF BUYING DEC 05-DEC 10 136% AREA 240² MILES RANKING 9 DEC 10-JUL 11 3% COST OF BUYING CAPITAL VALUE GROWTH RANKING 3 DEC 05-DEC 10 84% CAPITAL VALUE GROWTH DEC 10-JUL 11 6% DEC 05-DEC 10 49% DEC 10-JUL 11 -3% 1 HONG KONG 10 POPULATION 7.1M AREA 426² MILES COST OF BUYING RANKING 1 CAPITAL VALUE GROWTH DEC 05-DEC 10 79% DEC 10-JUL 11 11% MUMBAI 4 POPULATION 20.5M AREA 239² MILES SINGAPORE COST OF BUYING POPULATION 3.9M RANKING 10 AREA 273² MILES CAPITAL VALUE GROWTH COST OF BUYING DEC 05-DEC 10 138% RANKING 4 DEC 10-JUL 11 7% CAPITAL VALUE GROWTH DEC 05-DEC 10 92% DEC 10-JUL 11 16%key qualification is an active and growingworldwide market in residential real estate. 8Our cities all have sizeable non-domesticsales and lettings markets and growing SYDNEYinterest in them from overseas investors and POPULATION 4.6M AREA 810² MILESoccupants. They are cities that often feature COST OF BUYING RANKING 8as relocation and expansion targets on the CAPITAL VALUE GROWTH DEC 05-DEC 10 21%lists of international companies. DEC 10-JUL 11 5% - 03 - SAVILLS.COM
  4. 4. WORLD CITIES REVIEWHOW THE TOP 10 WORLD PLAYERS COMPARETHE PERFORMANCE AND FUTURE PROSPECTS OF OUR WORLD CLASS CITIEST here is a difficulty in measuring just 1,800 sq ft (although the Moscow SAVILLS EXECUTIVE UNIT (SEU) residential real estate across executive would also likely have a large By comparing a group of real people, our continents because the way ‘dacha’ or villa, in the nearby countryside cost comparison of residential real estatepeople live and what they expect differs for the weekends). We have also measured has a ‘real world’ relocation story at itsgreatly – so too does the size and style of any second homes that people are likely to heart. We take a typical ‘executive unit’, atheir homes. Even the way the size of the occupy as well. group of people that might start up orhome is measured differs from country to The international stereotypes of expand a global business in any country,country. (We have standardised all residential accommodation in different and then compare the residentialmeasurements here to GIA: Gross locations are not always accurate. Parisian accommodation that they would be likelyInternal Area). dwellings are among the smallest while to inhabit in each of the world cities. This, in itself gives some interesting Shanghai residents enjoy some of the The people who make up Savillsresults: a CEO in Sydney, Australia, might biggest, for example. Executive Unit (SEU) include one middleexpect to occupy a large house totalling Savills World Class index overcomes aged ex-pat CEO, one senior ex-patover 10,000 sq ft for example, but the the differences between buildings by director, a locally employed director andsame executive in Moscow would more measuring the cost of housing an identical four locally-employed administrative staff.likely find themselves in an apartment of group of people in different countries. They each live in different types of 2 1 ALL IN THE NUMBERS COMPARING WORLDWIDE PROPERTY SIZES ● SEU PROPERTY SIZE RANK ● NON-CEO PROPERTY SIZE RANK ● AVERAGE SQ FT GIA* PER SEU HOUSEHOLD ● AVERAGE SQ FT GIA* PER NON-CEO HOUSEHOLD 3000 1500 1 2 3 4 5 6 7 8 9 10 2 1 5 3 9 4 8 10 7 6 2500 NEW YORK HONG KONG 1200 MOSCOW SINGAPORE SHANGHAI LONDON 2000 MUMBAI NEW YORK HONG KONG TOKYO 900 TOKYO SINGAPORE LONDON SHANGHAI MOSCOW 1500 PARIS MUMBAI SYDNEY SYDNEY PARIS 1000 600 ● CEO PROPERTY SIZE RANK RATIO OF SIZE OF THE CEO PROPERTY COMPARED ● AVERAGE SQ FT GIA* PER CEO HOUSEHOLD TO THE AVERAGE NON-CEO PROPERTY12000 1 6 2 5 3 8 7 4 9 1010000 8 2 6 3 6 SINGAPORE 8000 SYDNEY SHANGHAI SINGAPORE MUMBAI TOKYO TOKYO SHANGHAI NEW YORK HONG KONG MUMBAI *GIA (GROSS INTERNAL AREA) LONDON 6000 PARIS MOSCOW 4000 3 4 6 3 2 SYDNEY 2000 HONG NEW YORK LONDON PARIS KONG MOSCOW 0 - 04 - SAVILLS.COM
  5. 5. WORLD CITIES REVIEW ❝ By comparing the accommodation costs of Savills Executive Unit we can truly compare the cost of residential real estate across some very different global cities ❞ There have been big differences in the investment, most notably London, SAVILLS EXECUTIVE UNIT performance of individual cities: Mumbai Sydney and Paris. (SEU) CONSISTS OF... grew by 154% over the last five and a half Hong Kong is the most expensive city years, while New York is up only 7% over in which to buy all the properties to house the whole period. There was no uniform the SEU. It is followed by London, with pattern to price movements – some cities Tokyo, Singapore and Paris close behind. like London, Hong Kong and Mumbai MIDDLE SENIOR LOCALLY saw a 2007 peak, followed by a 2009 RELATIVE COST AGED EX-PAT EMPLOYED trough and subsequent value rebound. EX-PAT DIRECTOR DIRECTOR OF BUYING CEO Other cities have seen no trough, either, (AVERAGE = 100) like Shanghai and Singapore growing substantially with only a minor slowdown HONG KONG in 2009, or, like Paris and Sydney, seeing LOCALLY EMPLOYED ADMIN STAFF modest growth and a shallow trough on 250 an upward-sloping plateau.household, some with children, some withpartners and some without and each ‘OLD WORLD’ 200member of the group chooses different VERSUS ‘NEW WORLD’ SINGAPORE LONDONtypes of locations and different types of The biggest difference in performance 150 TOKYOproperty in which to live. can be seen between what might be called PARIS SHANGHAI NEW YORK It is by comparing the accommodation the old economies of Tokyo, London, MOSCOW MUMBAI SYDNEYcosts of these people that we can truly Paris, Sydney and New York (which grew 100compare the cost of residential real estate on average by 32% since 2005) and theacross some very different global cities. new, or emerging, economies of Shanghai, Singapore, Hong Kong, Moscow and 50WORLD CLASS Mumbai which grew, on average, by 123%PRICE MOVEMENTS over the same period. 0The value of all properties, owned by the It becomes apparent that the debt-SEU, in all cities, rose by 77% on average induced crisis of 2008 was suffered most VALUE RANKINGSbetween December 2005 and June 2011. by the ‘old world’ cities and not ‘new After five years of very high price growthGrowth in the last six months was 6% and world’ ones. The biggest ‘old world’ value Hong Kong is now significantly morethe index is expected to continue rising to rebounds have been experienced in those expensive than the other 10 citiesthe end of this year at a more subdued rate. cities that are most open to ‘new world’ Hong Kong is characterised by limited land supply for expansion and price TOTAL INDEX MOVEMENTS PRICE GROWTH growth that has been fuelled by overseas DEC 05 - JUN 11 cash (particularly from mainland China). ● GLOBAL ● NEW WORLD ● OLD WORLD It has seen government measures, which MUMBAI 154% have started to cool the lower end of the250 SHANGHAI 143% market but we still expect to see growth in SINGAPORE 123% the remainder of 2011. The cities of London, Tokyo and Paris200 HONK KONG 98% cost very similar amounts, near to the MOSCOW 94% World Class average, while Sydney and PARIS 49% New York look good value in the ‘old150 world’, rivalling Shanghai and Moscow in TOKYO 44% cost terms. At the other end of the scale, LONDON 32% Mumbai costs 43% less than the average SYDNEY 27% of all 10 cities to house the whole SEU100 – but it is growing very fast from DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN 05 06 06 07 07 08 08 09 09 10 10 11 NEW YORK 7% this low base. - 05- SAVILLS.COM
  6. 6. WORLD CITIES REVIEWTHE RENTAL DIVIDENDEXPANDING OR RELOCATING? ACCURATE RENTAL COST RANKINGS ARE KEYT he total annual cost of renting all THE RELATIVE COST OF RENTING the accommodation needed by the SEU for one year averages£257,000 across all 10 cities, ranging from 150£366,000 in London to £115,000 inMumbai. For any relocating or expandingbusiness, these are sums worth noting inaddition to office costs; they will impact on 120any rental allowances and relocation AVERAGE = 100allowances for ex-pat staff and willprobably have an impact on the pay 90demands of local staff too. London and Paris have the highestrental levels of the 10 World Class cities 60and these are fuelled by domestic, as well as HONG KONG SINGAPORE NEW YORK SHANGHAIcorporate, demand as would-be purchasers MOSCOW MUMBAI 30 LONDON SYDNEYare pushed into the rental sector due to TOKYO PARIScredit restrictions. Hong Kong, Tokyo andNew York are also high priced rental citiesand, in common with all of the top five, are 0driven by ex-pat/corporate demand at thetop levels.WORLD CLASS RENT COST OF RENTAL GROWTH INDEXMOVEMENTS GLOBAL NEW WORLD OLD WORLDRents have moved, on average, across all 150cities at a slower pace than capital values,suppressing yields. There is an ‘old world’/ 140‘new world’ difference in the growth ofrents but it is not as pronounced as with 130capital values. This highlights that strongcapital-growth-motivated investment is 120driving capital values in the ‘new world’,meaning that yields are moving much 110faster in these cities. In consequence, it 100might be said that there is a stronger case DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN 05 06 06 07 07 08 08 09 09 10 10 11for rental-return-motivated investment inthe cities of the ‘old world’. RENTAL YIELD TOTAL ANNUAL COST OF SEU RENTAL ACCOMMODATION 5.1 3.6 AVERAGE LONDON AVERAGE MUMBAI £366,000 % % OLD WORLD NEW WORLD £257,000 £115,000 - 06 - SAVILLS.COM
  7. 7. 1 WORLD CITIES REVIEWHONG KONGDEMAND AT THE TOP OF THE HONG KONGMARKET IS SETTING RECORDSH ong Kong’s rise since 1997 to HONG KONG become a key global financial KEY FACTS centre, if not the key financialcentre in the region, has been meteoric. SAVILLS EXCUTIVE UNIT (SEU)Occupier demand and buyer confidencein the city’s residential real estate has SEU CAPITALbeen equal to it – so price growth has also SEU CAPITAL COST INbeen spectacular, despite experiencing a RELATION TO THE WORLDtemporary knock by the global banking CLASS AVERAGEcrisis of 2008. While genuine occupier demand,evidenced by rental increases, is strong,demand for the purchase of ‘trophyassets’ is stronger. There is huge demand AVERAGE +107% COST RANKINGfor investment properties from theChinese mainland, coupled with SEU RENTAL SEU RENTAL COST INrestricted supply. RELATION TO THE WORLD COST AVERAGE Cash-rich buyers therefore continue RANKING RENTAL YIELD CLASS AVERAGE 3.1%to buoy prime markets. Despiteattempts to introduce cooling measures,strong interest in traditional areas,means that luxury prices in Mid-Levels, Southside and The Peak 3 AVERAGE +24%continued to outperform other markets.Overwhelming demand for property at AVERAGE CAPITAL ❝ Hong Kong’sthe very top of the market GROWTH extreme scarcityis setting global records. The extreme scarcity ofprime houses on The Peak is of prime housesperhaps an exaggerated is an exaggeratedcaricature of thefundamental problem 79% 11% caricature ofaffecting all World Class DEC 2005 - DEC 2010 DEC 2010 - JUN 2011 the problemcities; there are simply justnot enough of the most affecting alldesirable properties to go SEU AVERAGE... World Classround. Rents have not kept TOTAL SQ FT ● £ PER SQ FT cities ❞pace with this capitalgrowth in Hong Kong so £1,370 CHINA SEU RENTALyields have come in – 1,090even thoughleasing supply is 3.1%limited. 1.610 SQ FT LONDON HONG KONG - 07 - SAVILLS.COM
  8. 8. 2WORLD CITIES REVIEWLONDONA LONDON PROPERTY IS STILL VIEWED BY MANYAS SAFE STORE OF WEALTHA lthough no LONDON longer the KEY FACTS most expensivebricks and mortar in the SAVILLS EXCUTIVE UNIT (SEU)world, London propertyis still highly valued. SEU CAPITALThe purchase of a SEU CAPITAL COST INLondon house or flat is RELATION TO THE WORLDviewed by many global CLASS AVERAGEplayers as a safe store ofwealth. Showing lowergrowth but also muchless volatility than manyof its ‘new world’ AVERAGE +27% COST RANKINGcounterparts, thereappears to be some SEU RENTAL SEU RENTAL COST INfoundation for this view RELATION TO THE WORLD COST AVERAGEof London. RANKING RENTAL YIELD CLASS AVERAGE 5.1% Across the city’s 1prime areas,international buyers +42%constitute 40% of themarket by value. Even AVERAGEin the suburbs, Greater London is acosmopolitan city. ❝ London As an established global city and major AVERAGE CAPITAL GROWTHfinancial centre, London attracts attracts residents and businessesbusinesses and residents from every partof the world as well as a strong investormarket, currently buoyed by sterling’s from every partweak exchange rate. Demand for rental property is strong, 27% 4% of the world,and is fuelling rent rises. Both corporate DEC 2005 - DEC 2010 DEC 2010 - plus the weak exchange rate JUN 2011demand (which has been growing witheconomic recovery) in the upper tiers ofthe rental sector and domestic demand SEU AVERAGE... buoys a strongfrom would-be purchasers, unable toobtain credit, has been encouraging rent TOTAL SQ FT ● £ PER SQ FT investor market❞rises. This is a common story in thedebt-reliant western world. A steady inflow of overseas equity £740 UK 1,160(which we estimated last year to total£3.7 billion) has fuelled price rises in theLondon market and seen it substantiallyoutperform the rest of the UK. The valueof the executive unit accommodation is 1.610 SQ FT LONDONnear its former peak but we do expect thatgrowth will ease over the next year or so. - 08 - SAVILLS.COM
  9. 9. 3 WORLD CITIES REVIEWTOKYOVALUING LAND OVER BUILDINGS MAKESTOKYO A UNIQUE MARKET TOKYO KEY FACTS SAVILLS EXCUTIVE UNIT (SEU) SEU CAPITAL SEU CAPITAL COST IN RELATION TO THE WORLD CLASS AVERAGET okyo residential real estate is perhaps one of the most different of the World City markets in thatit is land that is valued, not the building. AVERAGE +12% COST RANKINGTokyo’s dwellings are similar to a new carin that the value will depreciate almost as SEU RENTAL SEU RENTAL COST INsoon as it is built. Housing is assumed to RELATION TO THE WORLD COST AVERAGEhave a limited lifespan and generally RANKING RENTAL YIELD CLASS AVERAGE 4.2%replaced after 20 to 40 years. 4 After a decade-long housing slump,steady price appreciation was seen from the +23%mid-2000s until the financial crisis of2008, which saw prices fall back again. AVERAGEValues picked up in late 2009, but therecent earthquake cooled demand, ❝ Althoughparticularly in the luxury market, although AVERAGE CAPITAL GROWTHthe mid-market is said to be stable. Although rents have also declined since Tokyo’s rentsthe mid-1990s, property prices have fallen -3% have alsofaster, pushing out yields. This should declined sinceprovide a buying opportunity for Japan’sReal Estate Investment Trusts ( JREITs). 49% the mid-1990s, They were particularly big investors DEC 2005 - DEC 2010 DEC 2010 - JUN 2011 property pricesbetween 2005 and 2007, until the onset of have fallen faster, pushingthe financial crisis. Their renewed interestin high rental income could cause yields to SEU AVERAGE...harden again. The types of properties rented are very TOTAL SQ FT ● £ PER SQ FT out yields ❞different to the types of those for sale.Rental properties are purpose-built, locatedin and around the central business districts, £830 JAPAN 1,330targeted at employees of those areas, andcommand the higher prices. For purchase,inhabitants are more likely to choosedetached houses in the suburbs. Adminstaff will still live in the city centre, but in 1.610 SQ FT LONDON TOKYOvery small apartments or commute fromcheaper accommodation in one of many‘sleeper cities’. - 09 - SAVILLS.COM
  10. 10. 4WORLD CITIES REVIEWSINGAPORETHE CITY WITH THE WORLD’S HIGHESTCONCENTRATION OF MILLIONAIRES SINGAPORE KEY FACTS SAVILLS EXCUTIVE UNIT (SEU) SEU CAPITAL SEU CAPITAL COST IN RELATION TO THE WORLD CLASS AVERAGE +10% COST RANKINGW ith annualised growth in AVERAGE residential prices currently running at 16%, Singapore is a SEU RENTAL SEU RENTAL COST IN‘new world’ market writ large. Property RELATION TO THE WORLD COST AVERAGEprices have boomed since the economy RANKING RENTAL YIELD CLASS AVERAGE 4.1%rebounded in 2009.The average price rise of 6properties in the executive unit was 123%between Dec 05 and Jun 11. The city state’s open door policy -2%towards top end foreign economic AVERAGEcontributors, who traditionally gravitatetowards prime districts, means rental ❝ The rises havedemand is high. Investor demand is also AVERAGE CAPITAL GROWTHstrong because Singapore has the highestconcentration of millionaire households been fuelled by ain the world (16% with $1 million plus), strong economy,and their capacity to buy residential increasingproperty is obviously high. As foreigners without Permanent 92% 16% internationalResidency status are generally only DEC 2005 - DEC 2010 DEC 2010 - JUN 2011 purchasers,permitted to purchase private apartments restricted supply and extremelyand condominiums, the weight of foreignmoney in this segment of the Singapore SEU AVERAGE...residential market has also buoyed bothprices and rentals. TOTAL SQ FT ● £ PER SQ FT limited stock ❞ The rises have been fuelled by a strongeconomy, ever increasing internationalpurchasers from a booming Asia region, 1,610 £590coupled with tightly restricted landsupply and, at the very top of the market,extremely limited stock. This looks set to remain unalleviatedin the foreseeable future as new land for 1.610 SQ FT SINGAPOREdevelopment is limited and price growthin the luxury homes market is likely tobe sustained. - 10 - SAVILLS.COM
  11. 11. 5 WORLD CITIES REVIEWPARISUPWARD PRICE MOVEMENT CONTINUED IN 2011WITH STRONG DEMANDA s an international, cultural PARIS centre, Paris rivals London and KEY FACTS is currently seeing almost asmuch overseas investor activity. It is SAVILLS EXCUTIVE UNIT (SEU)nevertheless a very different real estatemarket with a small and constrained SEU CAPITALprime centre made up almost exclusively SEU CAPITAL COST INof apartments. Residential stock in RELATION TO THE WORLDprime central Paris is largely historic, CLASS AVERAGEwith very few new developments andvery few houses. There is strong international demandat the top end of the Paris market, andincreasing investment from BRIC AVERAGE +10% COST RANKINGeconomies, particularly while the Euroremains weak. Against this, prices are SEU RENTAL SEU RENTAL COST INdriving upwards on the back of the RELATION TO THE WORLD COST AVERAGEshortage of new supply. RANKING RENTAL YIELD CLASS AVERAGE 4.6% Upward price movement continued 2into 2011, with sustained strong demandand few available properties. Positivegrowth in transaction volumes and prices +41%in 2011 has been largely in the rare new AVERAGEapartment segment. Price growth across the whole Ile de ❝ ThereFrance region is being AVERAGE CAPITAL GROWTHled by central Paris, inmuch the same way as is strongcentral London is internationalleading growth in demand at theGreater London andthe Home Counties. 35% 10% top end of the Also similar to DEC 2005 - DEC 2010 DEC 2010 - JUN 2011 Paris market andmany World Class investment from BRICcities, Paris with itshistoric fabric and SEU AVERAGE...bounded by the innersuburbs has very TOTAL SQ FT ● £ PER SQ FT economies ❞constrained landsupply and expansion £740 FRANCEpotential. Like many 1,120‘old world’ cities itwill rely on the PARISregeneration of oldindustrial anddeprived areas to 1.610 SQ FT LONDONcreate new 21stcentury livingquarters. - 11 - SAVILLS.COM
  12. 12. 6WORLD CITIES REVIEWSHANGHAIRAPID ECONOMIC GROWTH HAS FUELLEDGROWTH IN THE HOUSING MARKETS hanghai’s metro population is the SHANGHAI largest in China, described as the KEY FACTS ‘showpiece’ of the booming economyof mainland China. Rapid re-development SAVILLS EXCUTIVE UNIT (SEU)began in 1990s, and Shanghai is now anational financial centre and aspires to be an SEU CAPITALinternational financial centre by 2020. SEU CAPITAL COST INShanghai ranks fifth in the latest edition of RELATION TO THE WORLDthe Global Financial Centres Index. CLASS AVERAGE The rapid economic growth has fuelled asubstantial rise in the housing market. Anumber of government measures, includingproperty taxes, have since been applied tocool the market and these appear to have -21% AVERAGE COST RANKINGhad an effect this year, particularly on thetop end of the market, where investor SEU RENTAL SEU RENTAL COST INactivity is concentrated. RELATION TO THE WORLD COST AVERAGE Shanghai, like most other first and RANKING RENTAL YIELD CLASS AVERAGE 2.2%second-tier cities in China, has announced 9that it plans to keep annual residential pricegrowth from exceeding annual growth inthe municipality’s GDP and disposable -53%income.This equates to roughly 8%. AVERAGEAlthough low in relation to recent growth,there is a large social housing programmeunderway, which will lower the average AVERAGE CAPITAL GROWTH ❝ Controls toprice (so Shanghai will cool prices canhit the target) and valuesare not likely to fall have the sideoff a cliff. effect of Although prices haverisen steeply, rents have 136% 3% stimulatingnot moved much (until DEC 2005 - DEC 2010 - rental growth so the prospects DEC 2010 JUN 2011recently) and yields areconsequently very low. Controls to cool prices SEU AVERAGE... for growthcan have the side effectof stimulating rental TOTAL SQ FT ● £ PER SQ FT look good ❞growth so, althoughShanghai’s rents have not CHINAmoved much yet, the 1,620prospects for growth aregood. Demand is £400growing from a coolingsales market andcorporate activity, 1.610 SQ FT SHANGHAIincluding expats, plusinward migration andinvestment. - 12 - SAVILLS.COM
  13. 13. 7 WORLD CITIES REVIEWNEW YORKTHE BIG APPLE HAS SHOWN THE LEAST GROWTHOF ANY OF THE TOP 10N ew York at least is a part of the NEW YORK Americas that can now call itself KEY FACTS ‘old world’. New York’sresidential real estate displays all the SAVILLS EXCUTIVE UNIT (SEU)characteristics shown by the otherdebt-reliant North Atlantic economies, SEU CAPITALwhich suffered from the financial crisis of SEU CAPITAL COST IN2008. New York has shown the least RELATION TO THE WORLDgrowth of any of the World Class of CLASS AVERAGE10 – still standing at its 2005 level. As astable, high quality, established andcosmopolitan world financial and culturalcentre, New York is looking exceptionallygood value at present. -31% AVERAGE COST RANKING New York, as a global city, hasoutperformed the national average over the SEU RENTAL SEU RENTAL COST INsame period. Once again, the global city RELATION TO THE WORLD COST AVERAGEcharacteristics of constrained space, little RANKING RENTAL YIELD CLASS AVERAGE 6.2%new development and burgeoning global 5demand has saved NY from the fate ofcontinued falls but, although internationalpurchasers are a growing presence, they are +21%not on the scale of some cities such as AVERAGELondon. The Big Apple is a rental town,and largely an American one, although theVenezuelans, French, AVERAGE CAPITAL GROWTHGermans and Chinese ❝ The Bigare all present in themarket and, at thesuper-high end, -2% Apple is aRussian buyers. 10% rental town,Overseas buyers areoften looking for DEC 2005 - DEC 2010 - and it is largelygood student DEC 2010 JUN 2011 an Americanaccommodation fortheir offspring. SEU AVERAGE... one ❞ With the economy TOTAL SQ FT ● £ PER SQ FTstill struggling and noimpact from bonuseson Wall Street this NORTH AMERICAyear, prospects for 1,230 £520growth are still weakbut lengthened yieldsand longer termprospects offer someincentives. 1.610SQ FT NEW YORK LONDON - 13 - SAVILLS.COM
  14. 14. 8WORLD CITIES REVIEWSYDNEYA STABLE INVESTMENT CHOICE WITH ANESTABLISHED HOUSING MARKET SYDNEY KEY FACTS SAVILLS EXCUTIVE UNIT (SEU) SEU CAPITALS SEU CAPITAL COST IN ydney has long had a high profile on RELATION TO THE WORLD the global stage but might be CLASS AVERAGE described as only recently burstingforth into the World Class when it comesto residential real estate. It is a stable andhigh-quality ‘old world’ investment choicewith a well established luxury housing -33% AVERAGE COST RANKINGmarket within an emerging ‘New World’region that is booming, although domestic SEU RENTAL SEU RENTAL COST INaffordability pressures coupled with global RELATION TO THE WORLD COST AVERAGEeconomic uncertainty has put pressure on RANKING RENTAL YIELD CLASS AVERAGE 4.7%prices in recent months. 7 Our analysis of the executive unithousing would seem to illustrate that +23%recent stagnation is confined to the verytop and bottom of the market, varying AVERAGEsuburb by suburb. Following fears thatoverseas buyers were contributing to a ❝ Sydney’shousing bubble, restrictions were placed AVERAGE CAPITAL GROWTHon the purchase of homes by foreigners,which have had some impact on undersupply oftransactions. accommodation, The average growth rates shown high in-therefore disguise some extremes aroundthe average, while an underlying housing 21% 5% migration andshortage remains. The city’s undersupply DEC 2005 - DEC 2010 DEC 2010 - JUN 2011 restrictions onof accommodation and high in-migrationplus restrictions on new development new development(due to zoning and geography) are likely SEU AVERAGE... are likely to keepto keep prices the highest of anyAustralian city. TOTAL SQ FT ● £ PER SQ FT prices high ❞ It would appear that Sydney isbeginning to display many of the common AUSTRALIAcharacteristics of the World Class city – 2,590constrained land supply, increasingpressure from overseas investors and highdemand for prime accommodation – butit is unusual in offering very spaciousliving accommodation in relation to other 1.610SQ FT £380 LONDON SYDNEYworld cities. - 14 - SAVILLS.COM
  15. 15. 9 WORLD CITIES REVIEWMOSCOWTHE FASTEST GROWING OF THE WORLDCITIES BETWEEN 2005-2008 MOSCOW KEY FACTS SAVILLS EXCUTIVE UNIT (SEU) SEU CAPITAL SEU CAPITAL COST IN RELATION TO THE WORLD CLASS AVERAGE -38% COST RANKINGM oscow’s prime markets are much more reliant on AVERAGE domestic buyers and are farless cosmopolitan than London or Paris. SEU RENTAL SEU RENTAL COST IN Consequently, the performance of the RELATION TO THE WORLD COST AVERAGERussian domestic economy is tightly RANKING RENTAL YIELD CLASS AVERAGE 5.6%interwoven with the performance of its 8residential property. The markets were hitbadly in 2008 and 2009 by economic -29%recession as global demand for Russia’senergy resources plummeted and the AVERAGEdomestic economy faltered. Investment inMoscow’s residential real estate has ❝ Driven byclosely followed the money being made in AVERAGE CAPITAL GROWTHthe national economy, primarily in rawcommodities such as oil. domestic buyers, As a market driven by domestic buyers, Moscow’sMoscow’s residential real estate market residential realreflects the volatility of a fast growingemerging market but has also shown the 84% 6% estate reflects thegrowth to match. DEC 2005 - DEC 2010 DEC 2010 - JUN 2011 volatility of a Moscow was the fastest growing of the10 world cities between 2005 and 2008. fast growing,Since global commodity prices have SEU AVERAGE... emergingrallied, there has been renewed vigour inthe market and prices are rising again, TOTAL SQ FT ● £ PER SQ FT market ❞albeit not at the same rate as pre 2007.Moscow currently stands fifth in terms of RUSSIAgrowth levels over the whole period, just 1,050below Hong Kong. Like all of the World Class cities under £470study, Moscow’s residential supplystruggles to keep pace with demand.Measures are being put in place to boost 1.610 SQ FT MOSCOW LONDONhousing delivery in an attempt to improveprice stability but how successful they willbe remains to be seen. - 15 - SAVILLS.COM
  16. 16. 10WORLD CITIES REVIEWMUMBAITHE NEWEST ADDITION TO THE LEAGUE OFWORLD CLASS CITIES MUMBAI KEY FACTS SAVILLS EXCUTIVE UNIT (SEU) SEU CAPITAL SEU CAPITAL COST IN RELATION TO THE WORLD CLASS AVERAGEM umbai is the newest addition to the league of World Class cities and is perhaps feeling -43% AVERAGE COST RANKINGuneasy in its role. Like all of the ‘newworld’ economies in this report it has seen SEU RENTAL SEU RENTAL COST INhigh levels of (volatile) price growth, RELATION TO THE WORLD COST AVERAGEalbeit off a low base, and currently stands RANKING RENTAL YIELD CLASS AVERAGE 3.1%the highest performing residential real 10estate market since 2005. There is a widespread sense that theextraordinary house price growth seen in -55%recent years, despite the 2008 downward AVERAGEcorrection, is unsustainable. As is the way when cities come on to ❝ There is athe world stage and adjust from being AVERAGE CAPITAL GROWTHnational capital to World Class cities,house prices in Mumbai have become widespreadunaffordable for many ordinary people. feeling in theThe pressures of growth and demand city thatimpinge on Mumbai in much the sameway as they do on Hong Kong and 138% 7% Mumbai’sSingapore. Mumbai is physically DEC 2005 - DEC 2010 DEC 2010 - JUN 2011 housing marketconstrained by being on a peninsula is in a bubble waiting towhere significant infrastructureinvestment is required for the city to SEU AVERAGE...expand. There is widespread feeling in thecity that Mumbai’s housing market is a TOTAL SQ FT ● £ PER SQ FT burst ❞bubble waiting to burst, but whether thisis the case, or whether it is entering a new INDIAglobal league of internationally priced 1,450cities, remains to be seen. This basic pressure on space has pushedup the cost of accommodation foreveryone. Mumbai has seen spectaculargrowth in rents, up 69% over five years, 1.610 SQ FT £320 MUMBAI LONDONbut capital values grew 138% over thesame period, suppressing yields. - 16 - SAVILLS.COM
  17. 17. WORLD CITIES REVIEWTHE INTERNATIONAL SUPER-WEALTHYTHE WORLD CLASS BILLIONAIRE HOMES MARKET IS PERFORMING WELLW orld Class cities not only attract It is likely that the World Class billionaire AVERAGE PROPERTY SIZE ● SEU SIZE RATIO international business people homes market will continue to out-perform COMPARED TO BILLIONAIRE but are also the haunt of the other markets for as long as the boom insuper-wealthy. Global billionaires who can global commodities and other markets SYDNEY 19,380 SQ FT 7 x SEU AVERAGEmake any country their home, and often continues and helps create new billionaires. 12 x SEU TOKYO 16,010 SQ FT AVERAGEhave several different residences across the There are already signs that a ‘wall of money’ SEUglobe, are important inward investors in from this sector is waiting to get out of SINGAPORE 12,300 SQ FT 8 x AVERAGEresidential real estate. China so currency export restrictions are a PARIS 10,760 SQ FT 10 x SEU AVERAGE It is interesting that, in the cities where key indicator for investors to watch there. SEUaverage dwelling sizes are among the smallest Continuing political upheaval, war and LONDON 7,860 SQ FT 7 x AVERAGE(e.g. Paris and Tokyo) billionaires will occupy civil unrest in various other parts of the SEU MUMBAI 6,790 SQ FT 5 x AVERAGEamongst the largest spaces of any city.They world, will ensure that there is continued SEUare buying what is most rare. demand from the international elite for safe NEW YORK 6,500 SQ FT 5 x AVERAGE In Moscow, where the billionaire’s city havens in World Class cities. Unfortunately, SEU SHANGHAI 5,380 SQ FT 3 x AVERAGEdwelling is a relatively modest 4,600 sq ft, this demand is assured for the foreseeable SEUthis is compensated by an enormous 21,500 future. We increasingly expect that some of HONG KONG 5,200 SQ FT 5 x AVERAGEsq ft mansion in the nearby countryside. this demand will find its way to ‘new world’ MOSCOW 4,630 SQ FT 4 x SEU AVERAGE cities as well as the ‘old’in future.VALUE RANKINGIn Hong Kong, the rarest commodity on the GLOBAL BILLIONAIRESisland is houses on The Peak, and Southside. BILLIONAIRE VS £ PER SQ FT FORAlthough they rank among the smallest EXECUTIVE UNIT BILLIONAIRE PROPERTYWorld Class billionaire properties (at around ● BILLIONAIRES5,200 sq ft), each of those square feet is the ● SEUmost expensive in the world.Tokyo is the HONG KONG 6,700 200next most expensive, due to exceptionally TOKYO 5,190high land values in central Tokyo, although it PARIS 3,270is not a market known for international LONDON 3,090billionaires (most would be Japanese). MOSCOW 2,520 Billionaire’s properties tell a different story 150to the executive unit.The ultra prime, NEW YORK 2,270billionaires markets in all cities out-performed SHANGHAI 1,320during the boom of 2007 and have also SINGAPORE 1,000out-performed the SEU in the six months to MUMBAI 710June 2011.This reflects the rate at which new 100 DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUNbillionaires have been created across the globe 05 06 06 07 07 08 08 09 09 10 10 11 SYDNEY 590and the rate at which they have invested inglobal real estate – in both emerged ‘new CAPITAL GROWTH OFworld’cities and in established ‘old world’ones BILLIONAIRE PROPERTY -2%like London, Paris and New York. 83% 10% ● DEC 05 - DEC 10 11% HONG KONG ● DEC 10 - JUL 11 TOKYOPROSPECTS FORFUTURE INVESTMENTThese established western markets have 49% 23% 38% 3% 110% 2% 26% 0% PARIS LONDON MOSCOW NEW YORKseen steady growth but not the same volatilityas cities in the ‘new world’, making themattractive ‘safe havens’for billionaires’wealth.We anticipate that Sydney, for example, has 32% 3% 144% 16% 138% 7% 21% 40% SHANGHAI SINGAPORE MUMBAI SYDNEYthis potential in the Pacific region. - 17 - SAVILLS.COM
  18. 18. WORLD CITIES REVIEWWHEN THE CITY IS NOT ENOUGH...IN SOME CITIES LEISURE PROPERTIES ARE AN ESSENTIAL PART OF THE DEALB ig cities have many attractions and This index is an eclectic mix of Thai city and the way its residential markets may be the sole place of residence resort villas, Russian dachas, English have little to do with the domestic for half of the world’s population country houses and French Riviera economy. Second homes nestled in a 0but many wealthy city enclaves are still estates. Nevertheless, these residential city’s hinterland are more prone to theempty at weekends. properties can be seen as an important condition of the domestic, and even the The tradition of spending the weekend component of World Class city life. rural economy, rather than the wealthin the countryside is well-established in being generated in the city state.many ‘old world’ cities like New York, UNDER PERFORMANCE It is not surprising then that WorldParis, London and Moscow. It is likely Leisure property has not seen the same Class leisure property experienced thethat the CEO in our executive unit, who level of performance as the main city greatest growth during the globaloccupies a small apartment in Paris or residences. The leisure index increased economic boom period in the years upMoscow during the week, would have a by only 33% between December 2005 to the end of 2007 but, as domesticsecond home in the country. and June 2011, compared to 77% in the economies suffered more in the global Those in Asian city states like Hong city index over the same period. This recession of 2008, leisure properties fellKong and Singapore are more likely to reflects the singularity of the World Class more – averaging -12% compared to -6%travel to neighbouring countries such as in the city. Leisure property is aThailand, Malaysia and Indonesia to discretionary purchase and was one ofenjoy their second homes. ❝ Leisure property the first luxuries to go in the downturn. For the Global Billionaire, meanwhile, is a discretionary Some of the countries of South East purchase and wasa leisure home forms an integral part of Asia where leisure properties are situatedoverall accommodation needs. We have have not seen the same levels of valuemeasured the leisure accommodation of one of the first growth, hence the World Class leisureboth the CEO and global billionairehouseholds in our World Class leisure luxuries to go in index has not received the same boost as the cities index. It has yet to return to itsproperties index. the downturn ❞ 2007 peak. HOME FROM HOME THE GLOBAL LEISURE VALUES INDEX 180 ● CITY PROPERTY ● LEISURE PROPERTY 160 140 120 INDEX DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN 05 06 06 07 07 08 08 09 09 10 10 11 - 18 - SAVILLS.COM
  19. 19. world cities reviewExPErT commENTarYsavills agENTs arE aT THE HEarT of THE global ProPErTY marKET Hong kong london Moscow MUMBAi new york raymond lee Jonathan Hewlett Alexander shatalov Jatin Patel elizabeth stribling savills Hong kong savills london intermark savills savills india stribling Associates +852 2842 4518 +44 (0) 20 7824 9018 +7 (495) 775 22 40 +91 9958 000 578 +1 212 452 4400 a.shatalov@ ❝Hong Kong’s real ❝The world is using ❝closely linked to ❝ mumbai is making ❝ New York’sestate is absorbing the london as a safe commodities markets, the transition from a attractions, currently low wealth of the asia haven store moscow’s real estate is major national city to prices and a favourable Pacific region❞ of wealth❞ a further play on the fully-fledged global exchange rate, mean the wealth created in the city and its real estate city is poised to attract cis’s main industries❞ prices reflect this❞ global HNWi❞ PAris sHAngHAi singAPore sydney tokyo Jean claude caputo Albert lau christopher Marriott shayne Harris chris Mancini riviera estates savills shanghai savills singapore savills sydney savills tokyo +33 (0) 493 874 115 +(8621) 6391 6688 +65 6415 3888 +61 (0) 2 8215 8879 +81 (0) 3 5562 1700 jc.caputo@ ❝The creation of new ❝High demand from ❝a strong investment ❝Tokyo has joined the ❝Paris is rivalling wealth in china has overseas occupiers and proposition with all ‘old world’ economies london to attract made shanghai and limited space keeps the advantages of an and its land offers a buyers who seek ‘old its real estate a rents and capital ‘old world’ city, in stable investment world’ stability❞ showpiece of the values high❞ the booming asia proposition❞ booming economy❞ Pacific region❞ rEsEarcH coNTacTs yolande Barnes simon smith Paul tostevin savills residential research savills research & consultancy rebecca gill +44 (0) 20 7409 8899 +852 2842 4573 sophie chick is published on behalf of savills (l&P) ltd by Blue door Media ltd, All information correct at time of going to press.All rights reserved. Articles may not be reproduced without written permission from savills (l&P) ltd. while every care is taken in compiling the content, neither thepublisher nor savills (l&P) ltd assumes responsibility for effects arising from this publication. Property Misdescriptions Act savills recommends applicants discuss theirinterest in a property with the negotiator who can answer your specific questions and advise if it is under offer. This is important if you are contemplating travelling somedistance. All descriptions, dimensions, references to condition and permissions for use and occupation, and other details are given without responsibility, and any intendingpurchasers or tenants should not rely on them as statements of fact, but must satisfy themselves by inspection of the property. Investment advice The information and opinionscontained in this magazine do not constitute professional advice and should not be relied upon. specific advice relating to your individual circumstances should be obtained. - 19 -
  20. 20. ❝ Residential markets in our World Class Cities have more in common with each other than themainstream markets of the countries in which they operate ❞