Price of ultra-prime property in the world’s top cities ‘to rise 27% in next five years’

Prices of ultra-prime property in the world’s leading financial destinations are set to grow by more than a quarter in the next five years.

The value of residential homes worth more than £10-million in London, New York, Hong Kong and Singapore will rise 27% in the next five years, new data from leading property and finance companies predicts.

Nick Candy, Chief Executive of developers Candy & Candy says, “By 2017 the Ultra High Net Worth Individuals (UHNWI) population is expected to have increased by 20% and their wealth by 30%.

“A trophy safe haven property in a global city is typically at the top of the shopping list for wealthy individuals, and their continuing appetite for such investment is expected to exert even greater influence over global property markets in the next few years.”

In 2012 there were more than 300 residential real estate transactions of over £10million that together were valued at more than £6.6billion, Savills research shows.

The total is expected to grow by 400 per year up to 2017 to a total value of £8.4billion. This growth is expected to be both organic and incremental as ultra-prime area expand and new properties are built, driven by the direct impact of global wealth increases and sector price rises.

Global wealth is predicted to increase by around 5% a year from around $122trillion to $150trillion by 2017, figures from The Boston Consulting Group show.

The research, produced by Candy & Candy, Savills and Deutsche Bank, this growth is already underway, as the number of billionaires rose by over 10% in the past year and their wealth increased by 14%.

Much of this wealth creation is being generated in emerging markets such as Africa, central Asia, China and South Korea. Asia’s wealth creation is already rising 11% a year and in Russia, Eastern Europe and Latin America by 9% a year.

North America is home to over one third of the UHNWI population and New York has the highest share of this figure and residential property in the city is good value following price falls in the national property market, says the report.

But when it comes to property transactions over £10million, London is a bigger market than New York, with more than 70% of sales going to overseas buyers, many of whom are establishing a base to live and work.

The rapid rise in wealth generation in Asia has had an unprecedented impact on price growth in the prime residential markets of Hong Kong and Singapore, with property prices increasing by over 150% in each. Asia’s UHNWI population is expected to grow by 50% more than North America’s in the next five years.

The report also examines the real costs to buy, occupy and sell a £10million property in London, New York, Hong Kong and Singapore.

Yolande Barnes, director of Savills World Research, says, “Recent changes to the taxation of international buyers owning property, particularly to stamp duty in Singapore and Hong Kong have made these locations expensive jurisdictions in which to invest. They now rank alongside New York in this respect.

“London’s recent tax changes pale by comparison and the UK capital remains one of the cheaper of the four cities in which to own and occupy real estate.

“But wealthy owners face paying higher property taxes. Hong Kong and Singapore has experienced such rapid price growth that property transaction taxes have been significantly increased by their governments to control the markets. New York has a long established annual property tax and London has also raised its levels of stamp duty and continues to debate the merits of a mansion tax.”

Although tax changes have failed to have a noticeable impact on the buying habits of UHNWIs, there are fears that manoeuvres by governments will put off investors down the line, the report says.

“Evidence from different global markets suggests that the taxation of market transactions tends to reduce the incidence of these transactions so turnover rates have reduced after the introduction of stamp duty taxes,” explained Yolande Barnes.

“We won’t see the rate of ultra-prime house price growth abating significantly over the long term. It will be driven by the rarity value and desirability of homes in established world cities,” she adds.

Source: Overseas Property Professional

Leave a Reply

Real Estate Blogs