Global investment in major cities is often blamed for pushing up house prices for ordinary residents, but research by Savills suggests this is not the case. International investment seems to be pushing up prime property values instead of raising ordinary mainstream values.
The 12 cities surveyed are Dubai, Hong Kong, Los Angeles, London, Mumbai, New York, Paris, San Francisco, Singapore, Shanghai, Sydney and Tokyo. The most expensive for mainstream residential properties are Hong Kong, New York and London. Both New York and Sydney have seen big price increases in recent years, despite restrictions on foreign ownership.
Mainstream properties have shown an average increase of 58% across the 12 cities since December 2008. Most growth is associated with economic recovery in the second half of that period, with 33% occurring between December 2011 and June 2015. Growth in prime markets is lower across the 12 cities, with an average increase of 37% over the past seven years.
On average, mainstream property values are 19% of prime property values in the 12 cities. Values are most heavily discounted in internationally invested cities including Hong Kong, Dubai, Paris and London. US cities have the smallest gap between prime and mainstream values, alongside locally invested cities such as Sydney and Tokyo.
It would appear that international investment is concentrated in prime markets, pushing up prices in the most expensive echelons. High levels of commercial real estate investment in US cities result in international investment in multifamily housing, but this appears to have had a moderating effect on rental growth instead of contributing to price growth in mainstream markets.
Savills is a strategic partner of Pam Golding Properties. Pam Golding reports that South African residential sales to international buyers remain low as a percentage of total sales – approximately 1% for SA and 3% for Pam Golding Properties nationally in 2015.
SAVILLS EXECUTIVE UNIT MAINSTREAM CAPITAL VALUES
Source Savills World Research, 12 Cities
Words Lea Jacobs