World class cities not only attract international business, they are also the haunt of a growing number of global billionaires who are increasingly important investors in residential real estate and their wealth is creating a new global super class of real estate, according to new research.
In the top ten cities real estate values have increased by 10% in first six months of 2011, the latest Savills Research global billionaire property index published today (Wednesday September 21) shows.
Hong Kong is in a league of its own in value terms with property worth £6,700 per square foot, an increase of 83% from December 2005 to December 2010 and a 10% increase on top of that to the end of June 2011.
In second place is Tokyo at £5,190 per square foot, followed by Paris at £3,270 and London at £3,090.
It is emerging markets that are seeing the biggest increases. Russia, in fourth place, has seen values rise 110% from December 2005 to 2010 and another 2% rise this year to take it to £2,520. Singapore has seen a 144% and 16% rise, while Mumbai has increased 138% and 7%.
Overall the index shows that the homes of the super rich in the top 10 cities worldwide rose by an average 10% in value in the first six months of this year. This compares to average price growth of 6% for a range of ordinary properties in the same cities and follows growth of 65% in billionaire properties over the previous five years.
‘We recently identified ten world class cities whose real estate markets have more in common with each other than the mainstream markets of the counties in which they operate and they are all attracting billionaire’s dollars, whether generated at home or overseas,’ says Yolande Barnes, director of residential research at Savills.
‘Global billionaires can make any country their home, and often have several different residences across the globe. Most will seek a base where they are doing business. This has the effect of funnelling global equity into the very best residential real estate, a rare commodity in any city. Billionaire buyers demand the best international standards of accommodation and are paying prices to match, creating a super class of global billionaire homes,’ she added.
The index also reveals some interesting observations regarding the size of homes for the super wealthy. Billionaires’ homes in Hong Kong may cost more on a price per square foot basis but they are amongst the smallest, averaging just over 5,000 square foot, only ahead of Moscow at 4,600 square foot. Sydney tops the table of size, at almost 20,000 square feet, but the real surprise is Tokyo, number two on prices, where the so called billionaire home averages 16,000 square feet, twelve times the average for the Savills ‘Executive Unit’. The rarity of property this size in the city makes the ultimate Tokyo home the most expensive of any world class city at £83 million.
In general terms, the ‘old world’ super prime markets have recorded lower price growth but, for now, dominate the top half of the table in terms of overall price. London, Paris and New York are now beginning to look good value for the global super rich, as they offer the relative price stability associated with more mature, ‘old world’ markets, coupled with political stability.
Within the ‘old world’ it is the more cosmopolitan cities that have fared much better than those that place restrictions on foreign purchasers or which are simply less likely to attract them. London in particular has been a real magnet for international wealth in recent years and saw net inward investment of over £3.3 billion in 2010, while Paris has seen recent sharp price rises, boosted by its position as an attractive entry point to the Shengen visa territory.