Savills 12 Cities Report

More documents

Recommendations

Info

20 21 World cities index Left: Paris real estate hampered. Below: Japan sees gain in momentum. Previous page: Pressure on affordability in London. Top: Hong Kong remains expensive. Below: New York rents exceed former highs. 2 Hong Kong Becoming more competitive as real estate costs and the HK$ fall 4 Paris Current market under-performance means opportunities for international buyers Top: Paris real estate H1 hampered. 2014 Since Above: 2008 Residential capital values 3.7% Japan sees 113.3% gain in Residential rents -2.4% momentum. 21.0% Office rents 0.7% 32.3% Hong Kong remains by far the most expensive city in which to buy residential property – 40% more expensive than London – but the gap is narrowing. Prime residential values have been hit hardest as cooling measures take effect, while rents are sliding due to weakening demand from the corporate sector. In the office markets, financefocused Hong Kong has suffered as firms downsize and consolidate. As rents have risen much less than capital values, a period of consolidation is required if yields are to stabilise. 2020 vision Saturation of prime: Despite a recent record listing of a Victoria Peak property, at $22,600psft, prime prices fell by 2.7% in H1 2014. However, the market is polarised and the value of mainstream property has increased by 8.5%, a trend we expect to continue. Infrastructure: The government’s capital spending between 2013 and 2018 is estimated to reach more than HK$70 billion per year, far exceeding the average annual capital expenditure of about HK$40 billion. A 26-mile Hong Kong- Zhuhai-Macao Bridge, subway extensions and a new high-speed rail link are planned. Economy: If and when China opens up economically, Hong Kong may lose its role as China’s bridge to the wider world. There are calls to diversify Hong Kong’s economic base, dominated by financial services, tourism, trading and logistics, and professional services. H1 2014 Since 2008 Residential capital values -1.7% -15.5% Residential rents 0.1% 9.1% Office rents 4.3% 15.6% Real estate in Paris has been hampered as a euro-denominated asset in a country posting relatively poor economic performance. Unlike London, the city hasn’t been able to buck the trend of its hinterland and price growth has been subdued, although office rents have continued to increase due to a lack of supply in central locations. 2020 vision Investment: Investor dislike of Hollande’s government continues to be a factor in current market under-performance, but this means there are significant opportunities for international buyers to take advantage of a weak domestic market. Prime property remains cheap compared to London and prices have room to grow. Limited development opportunities in historic central Paris will keep supply constrained. Economy: Challenges lie ahead in consolidating public finances, improving competitiveness and reducing unemployment. Weak economic growth is forecast, which will bear on the city’s commercial real estate markets. Tourism: Paris is one of the world’s most popular tourist destinations, attracting 32 million visitors per year, half from overseas. In 2013, 1.4 million Chinese tourists visited Paris, with 1.8 million expected in 2014 and 47% of money spent during their stay being directly on shopping. This has fuelled huge investment in the luxury retail sector, which will remain important in coming years. 3 new york Rents exceed former highs, but rising taxes could be a burden Top: Paris real estate H1 hampered. 2014 Since Above: 2008 Residential capital values 6.5% Japan sees 35.5% gain in Residential rents -0.1% momentum. 15.7% Office rents 5.4% 10.9% 5 tokyo Abenomics halted fall in asset prices and real estate gains momentum H1 2014 Since 2008 Residential capital values 3.1% -11.4% Residential rents 1.4% -13.4% Office rents 5.4% -15.7% New York rode out the global financial crisis better than much of the rest of the US. Prime residential prices are back at 2007 levels, while rents have exceeded former highs, underpinned by solid occupier demand (68% of households rent). New York is a key global tech city and a shift in occupier demand is shaping its corporate office market. 2020 vision Rising costs: In the medium term, rising mortgage rates will dampen price growth in the residential markets. Rising taxes will also put a burden on the city’s real estate sector. New York’s mayor, Bill de Blasio, has pledged to tackle income inequality in the city and is proposing overhauling the property tax system to shift the burden to higher value property. Land supply: With more people choosing to live and work in New York, the city faces growing pressure on its limited land. The Big Apple is investing in urban renewal, supported by investment in new infrastructure. Hudson Yards, providing <strong>12</strong>.7 million sqft of office, residential and retail space, is estimated to complete in 2018. Demographic change: New York’s population is changing as the city appeals to empty nesters and families, complementing the growing ranks of young professionals. No longer a stop-gap until a move to the suburbs, occupiers are now looking for new standards of amenities. For example, there is a growing trend toward dedicated space for pets in Manhattan’s new condo schemes. getty images, plainpicture Tokyo’s real estate markets continue to gain momentum after years in the doldrums. Residential capital values alone were up 3.1% in the first half of 2014 (more than all the growth in the previous seven years), while office rents grew 5.4% over the same period. Tokyo’s main attraction is still income streams rather than capital growth, the latter limited by global standards. 2020 vision Foreign investment: Foreign investors, attracted by Japan’s revived growth, will help finance new projects in the city. Crossborder investment made up 14% of investment in Tokyo’s office market in 2013, up from just 5% in 2011. Residential schemes are also attracting higher levels of foreign investment from Asian neighbours. The number of these investors is set to grow and will remain focused on income. Urban renewal: The 2020 Tokyo Olympics will help to maintain the momentum of Abenomics through the medium term. The majority of new infrastructure will be located in the Tokyo Bay area, a local catalyst for new condominium and commercial development. Domestic market: The economy in Japan is projected to follow a moderate growth trend for the foreseeable future and demand for top-quality office space is expected to remain high. An upward trend in rents is supported by robust demand across all the major industry sectors, coupled with restricted availability in many submarkets. H2 2014 savills.com H2 2014 savills.com
22 23 World cities index Below: Challenging outlook for Singapore. Right: Russia finds itself marginalised. Far right: Sydney’s prime sector values. EXPERT VIEW ‘Moscow will face an increasing reliance on local money’ 8 Sydney Investor speculation continues to push values in the prime sector H1 2014 Since 2008 Residential capital values -4.2% 44.6% Residential rents -3.5% 4.6% Office rents 7.3% -31.2% 6 Singapore Like Hong Kong, Singapore’s prime residential markets have slowed, while the mainstream market has continued to grow, driven by domestic owner-occupier demand. Economic growth has slowed in the city state, but Singapore’s diversified economic base underpins a robust office sector. Rents increased by 7.3% in H1 2014, second only to Dubai among the cities we monitor. 2020 vision Market controls: Cooling measures continue to bear on Singapore’s prime residential markets and the outlook remains challenging for the rest of 2014. Market controls are set to be a feature of Singapore over the coming years as it battles market affordability in a bid to remain competitive on the global stage. 7.3 % Percentage of Singapore rent increases in H1 2014 Outlook remains challenging for rest of 2014 as market controls set to feature Restricted land: Limited space, increasing wealth and a growing workforce will put pressure on land. There may be more relocation of lower value industry to Malaysia, where land, property and wages are cheaper. Singapore is set to become more rarefied, with Singaporeans protected by government access to housing. Employers will find it more difficult to attract and retain young talent from abroad because of the high cost of real estate. High-tech infrastructure: With high-tech infrastructure and close proximity to some of Asia’s key growth markets, Singapore is a world leader in business and has a growing reputation in the biotech and energy sectors. According to the World Bank, Singapore ranks as number one for the ease of doing business. YOLANDE BARNES <strong>Savills</strong> World Research ybarnes@savills.com 7 moscow Dependence on local ultra rich market Moscow’s real estate markets are increasingly reliant on domestic demand and investment as Russia finds itself marginalised. The residential markets posted modest price increases, while the office sector, hit by falling demand from foreign occupiers, saw price falls of 8.6% in the first part of 2014. 2020 vision Domestic demand: Moscow will face an increasing reliance on local money at a time when wealth generation in the country is slowing. A small pool of static, domestic, ultra rich may result in stagnation in the real estate markets. Regeneration: The legacy of industrial areas in central parts of Moscow present opportunity for redevelopment to both residential and office use. This will help to support an expansion of the city’s prime residential markets. Sporting events: The 2018 FIFA World Cup will put international eyes on Moscow and will be a catalyst for some major infrastructure improvements in the city. Nevertheless, opportunities for overseas inward investment will remain limited. H1 2014 Since 2008 Residential capital values 1.4% 9.4% Residential rents 1.5% -3.9% Office rents -8.6% -2.3% Sydney’s real estate markets enjoyed growth at a time when many other western markets were falling. As a consequence, recent price movements are off a high base. Office markets were flat in the first half of 2014, after a strong 2013. Affordability in the mainstream residential markets is stretched, dampening price growth but continue to record small increases. Meanwhile, investor speculation continues to push values in the prime sector, with strength in the super-prime market. 2020 vision Demographic change: While apartments have been a popular choice with downsizing and empty 33.4 % Rise in Sydney’s residential rents since 2008 H1 2014 Since 2008 Residential capital values 1.1% 36.9% Residential rents 1.0% 33.4% Office rents 0.0% 3.1% nesters seeking to release equity, Generations X and Y are seeing apartments as a more permanent living option, supporting the rise of owner-occupier demand. Densification: ‘City’ Sydney, or high-rise property, is set to perform best over the next five years. A strong residential market is creating the expectation of capital gains, buoyed by low vacancy rates, historically low interest rates and relatively attractive yields for investors. Development investment opportunities will be focused on an intensification of the centre. Economy: Australia’s economy has cooled in recent years as Asia has slowed and global demand for raw materials has declined. Interest rate rises are on the horizon and, coupled with a slowdown in occupier demand, the market is likely to see lower levels of growth. The test will be whether Sydney opens up its real estate market further to attract overseas money. Corbis, getty images H2 2014 savills.com Autumn H2 2014 2014 savills.com savills.com
Page 1 and 2: A question of cost Which city has o
Page 3 and 4: 3 contents 4-5 6-7 8-11 topline Rea
Page 5 and 6: 6 7 live WORK A question of cost Lo
Page 7 and 8: 10 11 special World report cities i
Page 9 and 10: 14 15 residential Yielding to chang
Page 11: 18 19 World cities index 2020 visio
Page 15 and 16: 26 outlook All the fun of the fair

Savills 12 Cities Report

Create successful ePaper yourself

Delete template?

Save as template?