When it comes to the global luxury real estate market, the reigning theme of 2019 has been uncertainty — with previously healthy growth rates softening due to political and economic instability around the world. According to the Prime Global Cities Index (PGCI) published quarterly by property consultancy Knight Frank, the annual prime price growth slowed to 1.4 percent (compared to 4.3 percent two years ago) across 46 world cities. The Index tracks prices at the top 5 percent of the global housing market, looking at where the world’s wealthiest are buying and investing in new homes.
Despite the slowing price growth, investors exercising caution with the advent of Brexit and rising interest rates all over the globe, a number of cities offer less muted growth opportunities. About 25 percent of Asian ultra-high-net-worth individuals (UHNWI, defined as those with net assets at US$30 million or more) are increasingly looking to buy a home outside of their country of residence by 2020, according to the Attitudes Survey in Knight Frank’s The Wealth Report. One can particularly expect a rise in property investments in European capitals in the coming year.
With that, we look at the second Prime Global Cities Index (PGCI) released in 2019 to forecast the top eight cities with the greatest investment potential for 2020.
With the annual growth of luxury residential prices at 12.7 percent in June 2019 compared to 14.1 percent three months before, Berlin might be seen as slowing down. However, it still boasts impressively competitive prices for Europe at €11,500 per square metre — for now that is. Among its most desirable neighbourhoods is Friedrichshain, once part of communist East Berlin, lined with Soviet-era buildings and the longest surviving stretch of the Berlin Wall. Now it’s renowned for its vibrant art scene, home to East Side Gallery, the longest open-air gallery in the world. Large multinationals such as Coca-Cola, Universal Music and Mercedes-Benz have also become attracted to the city’s creative energy, creating 30,000 plus jobs in the area and in turn growing demand for homes.
Another German city on the rise is Frankfurt, which has seen annual price growth from 9.6 percent to 12 percent over the May to June period in 2019. Luxury residences fetch typical prices of around €13,500 per square metre, which remains competitive with the rest of Europe. As a historical and cultural centre with abundant green spaces, the city is consistently ranked by Mercer as one of the top 10 most liveable cities in the world. Research by Jones Lang LaSalle also notes double-digit growth for investors in the foreseeable future — average asking prices on condominiums in 2018 rose by 11.2 percent and rents increased by 6.4 percent.
Following the ramifications of the 2008 global financial crisis and a dramatically devalued rouble in 2014, Russia’s luxury property market has been leading the country’s way to economic revival. Ranked third on Knight Frank’s latest PGCI, Moscow reported 9.5 percent annual growth for Q2 last year. Rising quickly up the ranks in prominence, Moscow’s prices for luxury apartments rose the second-fastest in the world during the first quarter, with the city moving up 34 positions in the index over the previous year. Whether it’s the prestigious addresses along its ‘Golden Mile’ and its US$2 million town houses or the up-and-coming neighbourhoods such as Agalarov Estate on the outskirts of Moscow, the historic city is worth consideration for luxury investment.
Manila offers the most potential for property investment at the moment. Topping the PIRI 100 list by Knight Frank, which measures the worth of 100 luxury residential markets by performance each year, Manila has enjoyed 11 percent of growth in home prices from 2017 to 2018 — a thrilling statistic during a downturn — thanks to its GDP growth exceeding 6 percent in 2018. Its UHNWI pool is expected to grow 37 percent by 2023, which adds to the keen interest in home purchases in the near future. Forty-eight percent of Knight Frank’s clients from the Philippines reported domestic property investment even after purchasing first and second homes. Eyes are on Alabang, an up-and-coming hotspot with a slew of infrastructure and development projects such as Alabang Town Center, which combines nature and retail, and Alabang West, a 10-billion-peso project that’s billed as Metro Manila’s answer to Beverly Hills.
Consistently in the top-10 rankings for quality of life and safety, and long favoured by the wealthy for Switzerland’s lenient tax policies, Geneva still maintains its reputation for high price and prestige. However, that might be about to change — prime prices fell 2 percent in 2018, according to Knight Frank, and with less banking secrecy practices due to recent crackdowns on Swiss private banks, those attracted to moving to Geneva prize financial legitimacy above all else. As such, mid- to high-level executives from an assortment of non-finance sectors are starting to move in, according to Alex Koch de Gooreynd, Switzerland specialist at Knight Frank, in an interview with FT.com. The consultancy’s Wealth Report states that Trois Chénes, to the east of Geneva’s city centre, is gaining interest with a brand new fast rail link, pedestrian corridor and cycling route providing easy access to the city centre. A two-bedroom apartment at Trois Chénes starts at 800,000 Swiss francs.
The relative affordability of living in Madrid and its attractive lifestyle are making it exceedingly popular among luxury homebuyers. The Spanish capital is recording similar prime price growth to Paris, at 5.2 percent according to Knight Frank. Non-prime districts on the outer areas of the city are performing well, while Knight Frank’s Rosa Uriol recommends Castellana Norte, a new area under construction to the north of Madrid. It’s set to create 2.6 million square metres of mixed-use development, including more than 10,000 homes, office space and, naturally, jobs. It sits just on the edge of Chamartín, one of Madrid’s most sought after addresses with limited new supply, and this northern sector of the city is certainly on the rise with the trendy and wealthy.
In the wake of Brexit’s impact on London, Paris is emerging as an alternative gateway city for living and investing in Europe. Young professionals and small families are gravitating to the 11th arrondissement, says Knight Frank’s Roddy Aris. “Located on the edge of the historic Marais district, the 11th arrondissement is a young, vibrant neighbourhood” replete with chic boutiques and restaurants. Prices are on the rise with the gentrification of the neighbouring 10th arrondissement, which has begun to pull up property values in the 11th. A three-bedroom apartment on each of the wide Haussmannian boulevards starts at €850,000, while the same property in the 4th arrondissement takes the price up to €1.2 million.
Switzerland’s capital is a reliable choice for wealthy investors looking to purchase a holiday home, simply because of its enduring desirability. At number two on Mercer’s quality of living city ranking this year, Zurich stands as a prominent centre for business while offering easy access to the ski slopes. Knight Frank records a 4.5 percent price growth in 2019 from last year, and while home prices remain the highest in Switzerland while rent yields stay relatively low, it’s the negative interest rates and high quality of life that continue to drive investors. Due to its location and history, Switzerland will always be a stable investment for those who can afford it.