Singapore, Sydney and Hong Kong Top Luxury Real Estate Investment Safe Havens
Global economic turmoil since 2008 has led to sharply different responses from luxury developers around the world today, says Knight Frank's newly released 2012 Global Development Review Report
Knight Frank's reports shows luxury residential development in 14 key locations around the world reveals that 50%-60% of demand for newly-built property in London and Europe has come from non-domestic investors in 2011.
The global prime development story was fairly consistent before the credit crunch - rising development volumes were met by rising demand and concurrent price growth.
After 2008, luxury development volumes across the world collapsed, and then began to rise slowly as economic confidence returned.
This simple narrative hides some significant trends that have altered the shape of the global development market over recent years.
Future Locations to Watch
- Abu Dhabi
- Los Angeles
- Africa (game reserves)
- Sao Paulo
Source: Knight Frank
The main casualties of the recent economic turmoil have been emerging locations - those tipped as the 'next big thing' in the late 2000s.
As the market contracted in 2008, there was a 'flight to safety', with buyers increasingly focused on established 'safe-haven' locations.
Even as the market returned to growth after 2009 it was these established markets that retained the lion's share of development activity and investment.
As a result, locations like New York, Paris, London, Monaco, Hong Kong and Singapore gained ground, while less established prime markets in the Middle East, Europe and North America, have struggled to gain traction.
In fact, as the global debt crisis worsened in 2011, the creation of a two-tier market in this regard has been enhanced, with flight capital flowing from troubled parts of the eurozone, and investors from the Middle East and North Africa looking to place investments in London, Paris, the South of France and New York.
In Asia, the development markets in Singapore, Sydney and Hong Kong have all been the main beneficiaries of global investors looking to find a secure home for their money.
Knight Frank's Head of Residential Research Liam Bailey tells the World Property Channel
, "Global prime development was consistent before the credit crunch, rising development volumes were met by rising demand and concurrent growth. After 2008, luxury development volumes across the world collapsed and have since begun to slowly rise as confidence returns. The main casualties of the recent economic turmoil have been emerging locations which were tipped as "the next big thing" in the late 2000s."
Bailey further comments, "As the market "contracted" in 2008, buyers increasingly focused on established "safe haven" locations. As the markets returned to growth in 2009 it was these locations that retained popularity and saw the highest levels of investment and activity. As a result locations like New York, London, Paris, Monaco, Hong Kong and Singapore gained ground while less established prime markets in the Middle East, Europe and North America have struggled to gain traction." Key Findings:
- The availability of funding for development remains an issue both in the West and in Asia but more so in Europe and the US.
- Bank funding still predominates in most of the global development centers, providing around 75% of all development finance.
- Construction and completion volumes have improved significantly in Asia-Pacific, they have fallen back in Europe and the US.
- Luxury homes in prime global cities will retain their safe haven reputation, but they will attract fewer speculative investors seeing a short term gain
- Development markets in Singapore, Sydney and Hong Kong have all been beneficiaries of investors looking to find a secure home for their money.
- Mumbai has the highest number of residential completions to date in 2011.