Savills - Insights - World Class Cities

INSIGHTS | World Cities Review |
AU T U M N 2 0 1 1

HONG KONG
LONDON
MOSCOW
MUMBAI
NEW YORK
PARIS
SINGAPORE
SHANGHAI
SYDNEY
WORLD TOKYO
CLASS
The 10 cities
shaping global
real estate

KEY

EMPIRE ORIENTAL
STATE PEARL
BUILDING TOWER

EIFFEL MARINA
TOWER BAY SANDS
2
SYDNEY

LONDON
BIG
OPERA
BEN
HOUSE

POPULATION 7.5M
ST BASIL’S BANK AREA 607² MILES
CATHEDRAL OF CHINA
COST OF BUYING
ASAKUSA
RANKING 2
GATEWAY CAPITAL VALUE GROWTH
KANNON
OF INDIA
TEMPLE
DEC 05-DEC 10 27%
DEC 10-JUL 11 4%
COST OF BUYING
1 – 10 RANKING

7

NEW YORK CITY
POPULATION 8.3M
AREA 469² MILES
COST OF BUYING
RANKING 7
CAPITAL VALUE GROWTH
DEC 05-DEC 10 10% 5
DEC 10-JUL 11 -2%
PARIS
POPULATION 6.6M
AREA 294² MILES
COST OF BUYING
RANKING 5
DEC 05-DEC 10 35%
DEC 10-JUL 11 10%

Welcome to Savills World Class index. that claim global status. Some rank top in
Following the success of our Four Global terms of lifestyle, quality of life, places to do
Cities Review in the Spring, we are now business,tax havens,cities of culture.Twenty
reporting on 10 cities that all compete for six of the world’s cities are megacities, with
real estate investment on the world stage. populations of over 10 million people.
ILLUSTRATIONS ADAM POINTER

These form our first World Class index of Although some of Savills World Class
residential real estate price movements from cities are megacities and most rank highly
2005. There are many cities on this planet on the plethora of global measures, their

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WORLD CITIES REVIEW

9 6

SHANGHAI
POPULATION 22.5M 3
MOSCOW AREA 1125² MILES

POPULATION 10.5M
COST OF BUYING
RANKING 6
TOKYO
AREA 417² MILES CAPITAL VALUE GROWTH POPULATION 13.0M
COST OF BUYING DEC 05-DEC 10 136% AREA 240² MILES
RANKING 9 DEC 10-JUL 11 3% COST OF BUYING
CAPITAL VALUE GROWTH RANKING 3
DEC 05-DEC 10 84% CAPITAL VALUE GROWTH
DEC 10-JUL 11 6%
DEC 05-DEC 10 49%
DEC 10-JUL 11 -3%

1
HONG KONG
10 POPULATION 7.1M
AREA 426² MILES
COST OF BUYING
RANKING 1
DEC 05-DEC 10 79%
DEC 10-JUL 11 11%
MUMBAI 4
POPULATION 20.5M
AREA 239² MILES SINGAPORE
COST OF BUYING
POPULATION 3.9M
RANKING 10
AREA 273² MILES
COST OF BUYING
DEC 05-DEC 10 138%
RANKING 4
DEC 10-JUL 11 7%
DEC 05-DEC 10 92%
DEC 10-JUL 11 16%

key qualification is an active and growing
worldwide market in residential real estate. 8

Our cities all have sizeable non-domestic
sales and lettings markets and growing
SYDNEY
interest in them from overseas investors and POPULATION 4.6M
AREA 810² MILES
occupants. They are cities that often feature COST OF BUYING
RANKING 8
as relocation and expansion targets on the CAPITAL VALUE GROWTH
DEC 05-DEC 10 21%
lists of international companies. DEC 10-JUL 11 5%

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WORLD CITIES REVIEW

HOW THE TOP 10 WORLD PLAYERS COMPARE
THE PERFORMANCE AND FUTURE PROSPECTS OF OUR WORLD CLASS CITIES

T
here is a difficulty in measuring just 1,800 sq ft (although the Moscow SAVILLS EXECUTIVE UNIT (SEU)
residential real estate across executive would also likely have a large By comparing a group of real people, our
continents because the way ‘dacha’ or villa, in the nearby countryside cost comparison of residential real estate
people live and what they expect differs for the weekends). We have also measured has a ‘real world’ relocation story at its
greatly – so too does the size and style of any second homes that people are likely to heart. We take a typical ‘executive unit’, a
their homes. Even the way the size of the occupy as well. group of people that might start up or
home is measured differs from country to The international stereotypes of expand a global business in any country,
country. (We have standardised all residential accommodation in different and then compare the residential
measurements here to GIA: Gross locations are not always accurate. Parisian accommodation that they would be likely
Internal Area). dwellings are among the smallest while to inhabit in each of the world cities.
This, in itself gives some interesting Shanghai residents enjoy some of the The people who make up Savills
results: a CEO in Sydney, Australia, might biggest, for example. Executive Unit (SEU) include one middle
expect to occupy a large house totalling Savills World Class index overcomes aged ex-pat CEO, one senior ex-pat
over 10,000 sq ft for example, but the the differences between buildings by director, a locally employed director and
same executive in Moscow would more measuring the cost of housing an identical four locally-employed administrative staff.
likely find themselves in an apartment of group of people in different countries. They each live in different types of
2 1

ALL IN THE NUMBERS
COMPARING WORLDWIDE PROPERTY SIZES

● SEU PROPERTY SIZE RANK ● NON-CEO PROPERTY SIZE RANK
● AVERAGE SQ FT GIA* PER SEU HOUSEHOLD ● AVERAGE SQ FT GIA* PER NON-CEO HOUSEHOLD

3000 1500
1 2 3 4 5 6 7 8 9 10 2 1 5 3 9 4 8 10 7 6
2500 NEW YORK

HONG KONG
1200

MOSCOW
SINGAPORE
SHANGHAI

LONDON
2000
MUMBAI

NEW YORK

HONG KONG

TOKYO

900
TOKYO

SINGAPORE
LONDON

SHANGHAI
MOSCOW

1500
PARIS
MUMBAI
SYDNEY
SYDNEY

PARIS

1000 600

● CEO PROPERTY SIZE RANK RATIO OF SIZE OF THE CEO PROPERTY COMPARED
● AVERAGE SQ FT GIA* PER CEO HOUSEHOLD TO THE AVERAGE NON-CEO PROPERTY

12000 1 6 2 5 3 8 7 4 9 10
10000 8 2 6 3 6
SINGAPORE

8000 SYDNEY SHANGHAI SINGAPORE MUMBAI TOKYO
TOKYO
SHANGHAI

NEW YORK

HONG KONG
MUMBAI

*GIA (GROSS INTERNAL AREA)
LONDON

6000
PARIS

MOSCOW

4000
3 4 6 3 2
SYDNEY

2000
HONG
NEW YORK LONDON PARIS KONG MOSCOW
0

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WORLD CITIES REVIEW

❝ By comparing the accommodation costs of Savills
Executive Unit we can truly compare the cost of residential
real estate across some very different global cities ❞
There have been big differences in the investment, most notably London,
SAVILLS EXECUTIVE UNIT performance of individual cities: Mumbai Sydney and Paris.
(SEU) CONSISTS OF... grew by 154% over the last five and a half Hong Kong is the most expensive city
years, while New York is up only 7% over in which to buy all the properties to house
the whole period. There was no uniform the SEU. It is followed by London, with
pattern to price movements – some cities Tokyo, Singapore and Paris close behind.
like London, Hong Kong and Mumbai
MIDDLE SENIOR LOCALLY saw a 2007 peak, followed by a 2009 RELATIVE COST
AGED EX-PAT EMPLOYED trough and subsequent value rebound.
EX-PAT DIRECTOR DIRECTOR OF BUYING
CEO Other cities have seen no trough, either,
(AVERAGE = 100)
like Shanghai and Singapore growing
substantially with only a minor slowdown

HONG KONG
in 2009, or, like Paris and Sydney, seeing
LOCALLY EMPLOYED ADMIN STAFF modest growth and a shallow trough on
250
an upward-sloping plateau.
household, some with children, some with
partners and some without and each ‘OLD WORLD’ 200
member of the group chooses different VERSUS ‘NEW WORLD’

SINGAPORE
LONDON
types of locations and different types of The biggest difference in performance
150

TOKYO
property in which to live. can be seen between what might be called

PARIS
SHANGHAI
NEW YORK
It is by comparing the accommodation the old economies of Tokyo, London,

MOSCOW
MUMBAI
SYDNEY
costs of these people that we can truly Paris, Sydney and New York (which grew 100
compare the cost of residential real estate on average by 32% since 2005) and the
across some very different global cities. new, or emerging, economies of Shanghai,
Singapore, Hong Kong, Moscow and 50
WORLD CLASS Mumbai which grew, on average, by 123%
PRICE MOVEMENTS over the same period. 0
The value of all properties, owned by the It becomes apparent that the debt-
SEU, in all cities, rose by 77% on average induced crisis of 2008 was suffered most VALUE RANKINGS
between December 2005 and June 2011. by the ‘old world’ cities and not ‘new After five years of very high price growth
Growth in the last six months was 6% and world’ ones. The biggest ‘old world’ value Hong Kong is now significantly more
the index is expected to continue rising to rebounds have been experienced in those expensive than the other 10 cities
the end of this year at a more subdued rate. cities that are most open to ‘new world’ Hong Kong is characterised by limited
land supply for expansion and price
TOTAL INDEX MOVEMENTS PRICE GROWTH growth that has been fuelled by overseas
DEC 05 - JUN 11 cash (particularly from mainland China).
● GLOBAL ● NEW WORLD ● OLD WORLD It has seen government measures, which
MUMBAI 154% have started to cool the lower end of the
250
SHANGHAI 143% market but we still expect to see growth in
SINGAPORE 123% the remainder of 2011.
The cities of London, Tokyo and Paris
200 HONK KONG 98% cost very similar amounts, near to the
MOSCOW 94% World Class average, while Sydney and
PARIS 49% New York look good value in the ‘old
150 world’, rivalling Shanghai and Moscow in
TOKYO 44% cost terms. At the other end of the scale,
LONDON 32% Mumbai costs 43% less than the average
SYDNEY 27% of all 10 cities to house the whole SEU
100 – but it is growing very fast from
DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN
05 06 06 07 07 08 08 09 09 10 10 11
NEW YORK 7% this low base.

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THE RENTAL DIVIDEND
EXPANDING OR RELOCATING? ACCURATE RENTAL COST RANKINGS ARE KEY

T
he total annual cost of renting all
THE RELATIVE COST OF RENTING
the accommodation needed by the
SEU for one year averages
£257,000 across all 10 cities, ranging from
150
£366,000 in London to £115,000 in
Mumbai. For any relocating or expanding
business, these are sums worth noting in
addition to office costs; they will impact on
120
any rental allowances and relocation AVERAGE = 100
allowances for ex-pat staff and will
probably have an impact on the pay 90
demands of local staff too.
London and Paris have the highest
rental levels of the 10 World Class cities 60
and these are fuelled by domestic, as well as

HONG KONG

SINGAPORE
NEW YORK

SHANGHAI
corporate, demand as would-be purchasers

MOSCOW

MUMBAI
30
LONDON

SYDNEY
are pushed into the rental sector due to

TOKYO
PARIS
credit restrictions. Hong Kong, Tokyo and
New York are also high priced rental cities
and, in common with all of the top five, are 0
driven by ex-pat/corporate demand at the
top levels.

WORLD CLASS RENT COST OF RENTAL GROWTH INDEX
MOVEMENTS GLOBAL NEW WORLD OLD WORLD
Rents have moved, on average, across all 150
cities at a slower pace than capital values,
suppressing yields. There is an ‘old world’/ 140
‘new world’ difference in the growth of
rents but it is not as pronounced as with 130
capital values. This highlights that strong
capital-growth-motivated investment is 120
driving capital values in the ‘new world’,
meaning that yields are moving much 110
faster in these cities. In consequence, it
100
might be said that there is a stronger case DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN
05 06 06 07 07 08 08 09 09 10 10 11
for rental-return-motivated investment in
the cities of the ‘old world’.

RENTAL YIELD TOTAL ANNUAL COST OF SEU RENTAL ACCOMMODATION

5.1 3.6
AVERAGE
LONDON AVERAGE MUMBAI

£366,000

% %
OLD WORLD NEW WORLD
£257,000
£115,000

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HONG KONG
DEMAND AT THE TOP OF THE HONG KONG
MARKET IS SETTING RECORDS

H
ong Kong’s rise since 1997 to HONG KONG
become a key global financial KEY FACTS
centre, if not the key financial
centre in the region, has been meteoric. SAVILLS EXCUTIVE
UNIT (SEU)
Occupier demand and buyer confidence
in the city’s residential real estate has SEU CAPITAL
been equal to it – so price growth has also SEU CAPITAL COST IN
been spectacular, despite experiencing a RELATION TO THE WORLD
temporary knock by the global banking CLASS AVERAGE
crisis of 2008.
While genuine occupier demand,
evidenced by rental increases, is strong,
demand for the purchase of ‘trophy
assets’ is stronger. There is huge demand AVERAGE
+107% COST RANKING
for investment properties from the
Chinese mainland, coupled with SEU RENTAL
SEU RENTAL COST IN
restricted supply. RELATION TO THE WORLD
COST AVERAGE
Cash-rich buyers therefore continue RANKING RENTAL YIELD CLASS AVERAGE

3.1%
to buoy prime markets. Despite
attempts to introduce cooling measures,
strong interest in traditional areas,
means that luxury prices in Mid-
Levels, Southside and The Peak
3 AVERAGE
+24%

continued to outperform other markets.
Overwhelming demand for property at
AVERAGE CAPITAL
❝ Hong Kong’s
the very top of the market
GROWTH
extreme scarcity
is setting global records.
The extreme scarcity of
prime houses on The Peak is of prime houses
perhaps an exaggerated
is an exaggerated
caricature of the
fundamental problem
79% 11% caricature of
affecting all World Class DEC 2005 -
DEC 2010
DEC 2010 -
JUN 2011 the problem
cities; there are simply just
not enough of the most affecting all
desirable properties to go SEU AVERAGE...
World Class
round.
Rents have not kept
TOTAL SQ FT ● £ PER SQ FT
cities ❞
pace with this capital
growth in Hong Kong so £1,370
CHINA
SEU RENTAL
yields have come in –

1,090
even though
leasing supply is
3.1%
limited.
1.610
SQ FT LONDON

HONG KONG

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LONDON
A LONDON PROPERTY IS STILL VIEWED BY MANY
AS SAFE STORE OF WEALTH

A
lthough no LONDON
longer the KEY FACTS
most expensive
bricks and mortar in the SAVILLS EXCUTIVE
UNIT (SEU)
world, London property
is still highly valued. SEU CAPITAL
The purchase of a SEU CAPITAL COST IN
London house or flat is RELATION TO THE WORLD
viewed by many global CLASS AVERAGE
players as a safe store of
wealth. Showing lower
growth but also much
less volatility than many
of its ‘new world’ AVERAGE
+27% COST RANKING
counterparts, there
appears to be some SEU RENTAL
SEU RENTAL COST IN
foundation for this view RELATION TO THE WORLD
COST AVERAGE
of London. RANKING RENTAL YIELD CLASS AVERAGE

5.1%
Across the city’s

1
prime areas,
international buyers +42%
constitute 40% of the
market by value. Even AVERAGE
in the suburbs, Greater London is a
cosmopolitan city.

❝ London
As an established global city and major AVERAGE CAPITAL
GROWTH
financial centre, London attracts
attracts residents
and businesses
businesses and residents from every part
of the world as well as a strong investor
market, currently buoyed by sterling’s from every part
weak exchange rate.
Demand for rental property is strong,
27% 4% of the world,
and is fuelling rent rises. Both corporate DEC 2005 -
DEC 2010
DEC 2010 - plus the weak
exchange rate
JUN 2011
demand (which has been growing with
economic recovery) in the upper tiers of
the rental sector and domestic demand SEU AVERAGE... buoys a strong
from would-be purchasers, unable to
obtain credit, has been encouraging rent
TOTAL SQ FT ● £ PER SQ FT investor market❞
rises. This is a common story in the
debt-reliant western world.
A steady inflow of overseas equity £740 UK

1,160
(which we estimated last year to total
£3.7 billion) has fuelled price rises in the
London market and seen it substantially
outperform the rest of the UK. The value
of the executive unit accommodation is
1.610
SQ FT LONDON

near its former peak but we do expect that
growth will ease over the next year or so.

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WORLD CITIES REVIEW

TOKYO
VALUING LAND OVER BUILDINGS MAKES
TOKYO A UNIQUE MARKET

TOKYO
KEY FACTS

SAVILLS EXCUTIVE
UNIT (SEU)

SEU CAPITAL
SEU CAPITAL COST IN
RELATION TO THE WORLD
CLASS AVERAGE

T
okyo residential real estate is
perhaps one of the most different
of the World City markets in that
it is land that is valued, not the building. AVERAGE
+12% COST RANKING
Tokyo’s dwellings are similar to a new car
in that the value will depreciate almost as SEU RENTAL
SEU RENTAL COST IN
soon as it is built. Housing is assumed to RELATION TO THE WORLD
COST AVERAGE
have a limited lifespan and generally RANKING RENTAL YIELD CLASS AVERAGE

4.2%
replaced after 20 to 40 years.

4
After a decade-long housing slump,
steady price appreciation was seen from the +23%
mid-2000s until the financial crisis of
2008, which saw prices fall back again. AVERAGE
Values picked up in late 2009, but the
recent earthquake cooled demand,

❝ Although
particularly in the luxury market, although AVERAGE CAPITAL
GROWTH
the mid-market is said to be stable.
Although rents have also declined since Tokyo’s rents
the mid-1990s, property prices have fallen
-3% have also
faster, pushing out yields. This should
declined since
provide a buying opportunity for Japan’s
Real Estate Investment Trusts ( JREITs). 49% the mid-1990s,
They were particularly big investors DEC 2005 -
DEC 2010
DEC 2010 -
JUN 2011 property prices
between 2005 and 2007, until the onset of
have fallen
faster, pushing
the financial crisis. Their renewed interest
in high rental income could cause yields to SEU AVERAGE...
harden again.
The types of properties rented are very
TOTAL SQ FT ● £ PER SQ FT out yields ❞
different to the types of those for sale.
Rental properties are purpose-built, located
in and around the central business districts,
£830 JAPAN

1,330
targeted at employees of those areas, and
command the higher prices. For purchase,
inhabitants are more likely to choose
detached houses in the suburbs. Admin
staff will still live in the city centre, but in
1.610
SQ FT LONDON
TOKYO
very small apartments or commute from
cheaper accommodation in one of many
‘sleeper cities’.

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WORLD CITIES REVIEW

SINGAPORE
THE CITY WITH THE WORLD’S HIGHEST
CONCENTRATION OF MILLIONAIRES

SINGAPORE
KEY FACTS

SAVILLS EXCUTIVE
UNIT (SEU)

SEU CAPITAL
SEU CAPITAL COST IN
CLASS AVERAGE

+10% COST RANKING
W
ith annualised growth in AVERAGE
residential prices currently
running at 16%, Singapore is a SEU RENTAL
SEU RENTAL COST IN
‘new world’ market writ large. Property RELATION TO THE WORLD
COST AVERAGE
prices have boomed since the economy RANKING RENTAL YIELD CLASS AVERAGE

4.1%
rebounded in 2009.The average price rise of

6
properties in the executive unit was 123%
between Dec 05 and Jun 11.
The city state’s open door policy
-2%
towards top end foreign economic AVERAGE
contributors, who traditionally gravitate
towards prime districts, means rental

❝ The rises have
demand is high. Investor demand is also AVERAGE CAPITAL
GROWTH
strong because Singapore has the highest
concentration of millionaire households been fuelled by a
in the world (16% with $1 million plus), strong economy,
and their capacity to buy residential
increasing
property is obviously high.
As foreigners without Permanent 92% 16% international
Residency status are generally only DEC 2005 -
DEC 2010
DEC 2010 -
JUN 2011 purchasers,
permitted to purchase private apartments
restricted supply
and extremely
and condominiums, the weight of foreign
money in this segment of the Singapore SEU AVERAGE...
residential market has also buoyed both
prices and rentals.
TOTAL SQ FT ● £ PER SQ FT limited stock ❞
The rises have been fuelled by a strong
economy, ever increasing international
purchasers from a booming Asia region,

1,610 £590
coupled with tightly restricted land
supply and, at the very top of the market,
extremely limited stock.
This looks set to remain unalleviated
in the foreseeable future as new land for
1.610
SQ FT SINGAPORE

development is limited and price growth
in the luxury homes market is likely to
be sustained.

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WORLD CITIES REVIEW

PARIS
UPWARD PRICE MOVEMENT CONTINUED IN 2011
WITH STRONG DEMAND

A
s an international, cultural PARIS
centre, Paris rivals London and KEY FACTS
is currently seeing almost as
much overseas investor activity. It is SAVILLS EXCUTIVE
UNIT (SEU)
nevertheless a very different real estate
market with a small and constrained SEU CAPITAL
prime centre made up almost exclusively SEU CAPITAL COST IN
of apartments. Residential stock in RELATION TO THE WORLD
prime central Paris is largely historic, CLASS AVERAGE
with very few new developments and
very few houses.
There is strong international demand
at the top end of the Paris market, and
increasing investment from BRIC AVERAGE
+10% COST RANKING
economies, particularly while the Euro
remains weak. Against this, prices are SEU RENTAL
SEU RENTAL COST IN
driving upwards on the back of the RELATION TO THE WORLD
COST AVERAGE
shortage of new supply. RANKING RENTAL YIELD CLASS AVERAGE

4.6%
Upward price movement continued

2
into 2011, with sustained strong demand
and few available properties. Positive
growth in transaction volumes and prices
+41%
in 2011 has been largely in the rare new AVERAGE
apartment segment.
Price growth across the whole Ile de

❝ There
France region is being AVERAGE CAPITAL
GROWTH
led by central Paris, in
much the same way as is strong
central London is international
leading growth in
demand at the
Greater London and
the Home Counties.
35% 10% top end of the
Also similar to DEC 2005 -
DEC 2010
DEC 2010 -
JUN 2011 Paris market and
many World Class
investment
from BRIC
cities, Paris with its
historic fabric and SEU AVERAGE...
bounded by the inner
suburbs has very
TOTAL SQ FT ● £ PER SQ FT economies ❞
constrained land
supply and expansion
£740
FRANCE
potential. Like many

1,120
‘old world’ cities it
will rely on the PARIS
regeneration of old
industrial and
deprived areas to
1.610
SQ FT LONDON

create new 21st
century living
quarters.

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WORLD CITIES REVIEW

SHANGHAI
RAPID ECONOMIC GROWTH HAS FUELLED
GROWTH IN THE HOUSING MARKET

S
hanghai’s metro population is the SHANGHAI
largest in China, described as the KEY FACTS
‘showpiece’ of the booming economy
of mainland China. Rapid re-development SAVILLS EXCUTIVE
UNIT (SEU)
began in 1990s, and Shanghai is now a
national financial centre and aspires to be an SEU CAPITAL
international financial centre by 2020. SEU CAPITAL COST IN
Shanghai ranks fifth in the latest edition of RELATION TO THE WORLD
the Global Financial Centres Index. CLASS AVERAGE
The rapid economic growth has fuelled a
substantial rise in the housing market. A
number of government measures, including
property taxes, have since been applied to
cool the market and these appear to have
-21%
AVERAGE
COST RANKING
had an effect this year, particularly on the
top end of the market, where investor SEU RENTAL
SEU RENTAL COST IN
activity is concentrated. RELATION TO THE WORLD
COST AVERAGE
Shanghai, like most other first and RANKING RENTAL YIELD CLASS AVERAGE

2.2%
second-tier cities in China, has announced

9
that it plans to keep annual residential price
growth from exceeding annual growth in
the municipality’s GDP and disposable
-53%
income.This equates to roughly 8%. AVERAGE
Although low in relation to recent growth,
there is a large social housing programme
underway, which will lower the average AVERAGE CAPITAL
GROWTH ❝ Controls to
price (so Shanghai will
cool prices can
hit the target) and values
are not likely to fall have the side
off a cliff. effect of
Although prices have
risen steeply, rents have
136% 3% stimulating
not moved much (until DEC 2005 - DEC 2010 - rental growth so
the prospects
DEC 2010 JUN 2011
recently) and yields are
consequently very low.
Controls to cool prices SEU AVERAGE... for growth
can have the side effect
of stimulating rental
TOTAL SQ FT ● £ PER SQ FT look good ❞
growth so, although
Shanghai’s rents have not
CHINA
moved much yet, the

1,620
prospects for growth are
good. Demand is
£400
growing from a cooling
sales market and
corporate activity,
1.610
SQ FT
SHANGHAI

including expats, plus
inward migration and
investment.

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WORLD CITIES REVIEW

NEW YORK
THE BIG APPLE HAS SHOWN THE LEAST GROWTH
OF ANY OF THE TOP 10

N
ew York at least is a part of the NEW YORK
Americas that can now call itself KEY FACTS
‘old world’. New York’s
residential real estate displays all the SAVILLS EXCUTIVE
UNIT (SEU)
characteristics shown by the other
debt-reliant North Atlantic economies, SEU CAPITAL
which suffered from the financial crisis of SEU CAPITAL COST IN
2008. New York has shown the least RELATION TO THE WORLD
growth of any of the World Class of CLASS AVERAGE
10 – still standing at its 2005 level. As a
stable, high quality, established and
cosmopolitan world financial and cultural
centre, New York is looking exceptionally
good value at present.
-31%
AVERAGE
COST RANKING
New York, as a global city, has
outperformed the national average over the SEU RENTAL
SEU RENTAL COST IN
same period. Once again, the global city RELATION TO THE WORLD
COST AVERAGE
characteristics of constrained space, little RANKING RENTAL YIELD CLASS AVERAGE

6.2%
new development and burgeoning global

5
demand has saved NY from the fate of
continued falls but, although international
purchasers are a growing presence, they are
+21%
not on the scale of some cities such as AVERAGE
London. The Big Apple is a rental town,
and largely an American one, although the
Venezuelans, French, AVERAGE CAPITAL
GROWTH
Germans and Chinese

❝ The Big
are all present in the
market and, at the
super-high end,
-2% Apple is a
Russian buyers.
10% rental town,
Overseas buyers are
often looking for DEC 2005 - DEC 2010 - and it is largely
good student
DEC 2010 JUN 2011
an American
accommodation for
their offspring. SEU AVERAGE... one ❞
With the economy TOTAL SQ FT ● £ PER SQ FT
still struggling and no
impact from bonuses
on Wall Street this
NORTH AMERICA
year, prospects for

1,230 £520
growth are still weak
but lengthened yields
and longer term
prospects offer some
incentives.
1.610SQ FT
NEW YORK
LONDON

- 13 -
SAVILLS.COM

8
WORLD CITIES REVIEW

SYDNEY
A STABLE INVESTMENT CHOICE WITH AN
ESTABLISHED HOUSING MARKET

SYDNEY
KEY FACTS

SAVILLS EXCUTIVE
UNIT (SEU)

SEU CAPITAL

S
SEU CAPITAL COST IN
ydney has long had a high profile on RELATION TO THE WORLD
the global stage but might be CLASS AVERAGE
described as only recently bursting
forth into the World Class when it comes
to residential real estate. It is a stable and
high-quality ‘old world’ investment choice
with a well established luxury housing
-33%
AVERAGE
COST RANKING
market within an emerging ‘New World’
region that is booming, although domestic SEU RENTAL
SEU RENTAL COST IN
affordability pressures coupled with global RELATION TO THE WORLD
COST AVERAGE
economic uncertainty has put pressure on RANKING RENTAL YIELD CLASS AVERAGE

4.7%
prices in recent months.

7
Our analysis of the executive unit
housing would seem to illustrate that +23%
recent stagnation is confined to the very
top and bottom of the market, varying AVERAGE
suburb by suburb. Following fears that
overseas buyers were contributing to a

❝ Sydney’s
housing bubble, restrictions were placed AVERAGE CAPITAL
GROWTH
on the purchase of homes by foreigners,
which have had some impact on undersupply of
transactions. accommodation,
The average growth rates shown
high in-
therefore disguise some extremes around
the average, while an underlying housing
21% 5% migration and
shortage remains. The city’s undersupply DEC 2005 -
DEC 2010
DEC 2010 -
JUN 2011 restrictions on
of accommodation and high in-migration
plus restrictions on new development new development
(due to zoning and geography) are likely SEU AVERAGE... are likely to keep
to keep prices the highest of any
Australian city.
TOTAL SQ FT ● £ PER SQ FT prices high ❞
It would appear that Sydney is
beginning to display many of the common
AUSTRALIA
characteristics of the World Class city –

2,590
constrained land supply, increasing
pressure from overseas investors and high
demand for prime accommodation – but
it is unusual in offering very spacious
living accommodation in relation to other
1.610SQ FT £380 LONDON
SYDNEY
world cities.

- 14 -
SAVILLS.COM

9
WORLD CITIES REVIEW

MOSCOW
THE FASTEST GROWING OF THE WORLD
CITIES BETWEEN 2005-2008

MOSCOW
KEY FACTS

SAVILLS EXCUTIVE
UNIT (SEU)

SEU CAPITAL
SEU CAPITAL COST IN
CLASS AVERAGE

-38% COST RANKING
M
oscow’s prime markets are
much more reliant on AVERAGE
domestic buyers and are far
less cosmopolitan than London or Paris. SEU RENTAL
SEU RENTAL COST IN
Consequently, the performance of the RELATION TO THE WORLD
COST AVERAGE
Russian domestic economy is tightly RANKING RENTAL YIELD CLASS AVERAGE

5.6%
interwoven with the performance of its

8
residential property. The markets were hit
badly in 2008 and 2009 by economic -29%
recession as global demand for Russia’s
energy resources plummeted and the AVERAGE
domestic economy faltered. Investment in
Moscow’s residential real estate has

❝ Driven by
closely followed the money being made in AVERAGE CAPITAL
GROWTH
the national economy, primarily in raw
commodities such as oil. domestic buyers,
As a market driven by domestic buyers, Moscow’s
Moscow’s residential real estate market
residential real
reflects the volatility of a fast growing
emerging market but has also shown the
84% 6% estate reﬂects the
growth to match. DEC 2005 -
DEC 2010
DEC 2010 -
JUN 2011 volatility of a
Moscow was the fastest growing of the
10 world cities between 2005 and 2008. fast growing,
Since global commodity prices have SEU AVERAGE... emerging
rallied, there has been renewed vigour in
the market and prices are rising again,
TOTAL SQ FT ● £ PER SQ FT
market ❞
albeit not at the same rate as pre 2007.
Moscow currently stands fifth in terms of
RUSSIA
growth levels over the whole period, just

1,050
below Hong Kong.
Like all of the World Class cities under £470
study, Moscow’s residential supply
struggles to keep pace with demand.
Measures are being put in place to boost
1.610
SQ FT MOSCOW
LONDON

housing delivery in an attempt to improve
price stability but how successful they will
be remains to be seen.

- 15 -
SAVILLS.COM

10
WORLD CITIES REVIEW

MUMBAI
THE NEWEST ADDITION TO THE LEAGUE OF
WORLD CLASS CITIES

MUMBAI
KEY FACTS

SAVILLS EXCUTIVE
UNIT (SEU)

SEU CAPITAL
SEU CAPITAL COST IN
CLASS AVERAGE

M
umbai is the newest addition
to the league of World Class
cities and is perhaps feeling
-43%
AVERAGE
COST RANKING
uneasy in its role. Like all of the ‘new
world’ economies in this report it has seen SEU RENTAL
SEU RENTAL COST IN
high levels of (volatile) price growth, RELATION TO THE WORLD
COST AVERAGE
albeit off a low base, and currently stands RANKING RENTAL YIELD CLASS AVERAGE

3.1%
the highest performing residential real

10
estate market since 2005.
There is a widespread sense that the
extraordinary house price growth seen in
-55%
recent years, despite the 2008 downward AVERAGE
correction, is unsustainable.
As is the way when cities come on to

❝ There is a
the world stage and adjust from being AVERAGE CAPITAL
GROWTH
national capital to World Class cities,
house prices in Mumbai have become widespread
unaffordable for many ordinary people. feeling in the
The pressures of growth and demand
city that
impinge on Mumbai in much the same
way as they do on Hong Kong and 138% 7% Mumbai’s
Singapore. Mumbai is physically DEC 2005 -
DEC 2010
DEC 2010 -
JUN 2011 housing market
constrained by being on a peninsula
is in a bubble
waiting to
where significant infrastructure
investment is required for the city to SEU AVERAGE...
expand. There is widespread feeling in the
city that Mumbai’s housing market is a
TOTAL SQ FT ● £ PER SQ FT burst ❞
bubble waiting to burst, but whether this
is the case, or whether it is entering a new
INDIA
global league of internationally priced

1,450
cities, remains to be seen.
This basic pressure on space has pushed
up the cost of accommodation for
everyone. Mumbai has seen spectacular
growth in rents, up 69% over five years,
1.610
SQ FT £320 MUMBAI
LONDON

but capital values grew 138% over the
same period, suppressing yields.

- 16 -
SAVILLS.COM

WORLD CITIES REVIEW

THE INTERNATIONAL SUPER-WEALTHY
THE WORLD CLASS BILLIONAIRE HOMES MARKET IS PERFORMING WELL

W
orld Class cities not only attract It is likely that the World Class billionaire AVERAGE PROPERTY SIZE
● SEU SIZE RATIO
international business people homes market will continue to out-perform COMPARED TO BILLIONAIRE
but are also the haunt of the other markets for as long as the boom in
super-wealthy. Global billionaires who can global commodities and other markets SYDNEY 19,380 SQ FT 7 x SEU
AVERAGE
make any country their home, and often continues and helps create new billionaires. 12 x
SEU
TOKYO 16,010 SQ FT AVERAGE
have several different residences across the There are already signs that a ‘wall of money’
SEU
globe, are important inward investors in from this sector is waiting to get out of SINGAPORE 12,300 SQ FT 8 x AVERAGE
residential real estate. China so currency export restrictions are a PARIS 10,760 SQ FT 10 x SEU
AVERAGE
It is interesting that, in the cities where key indicator for investors to watch there.
SEU
average dwelling sizes are among the smallest Continuing political upheaval, war and LONDON 7,860 SQ FT 7 x AVERAGE
(e.g. Paris and Tokyo) billionaires will occupy civil unrest in various other parts of the SEU
MUMBAI 6,790 SQ FT 5 x AVERAGE
amongst the largest spaces of any city.They world, will ensure that there is continued
SEU
are buying what is most rare. demand from the international elite for safe NEW YORK 6,500 SQ FT 5 x AVERAGE
In Moscow, where the billionaire’s city havens in World Class cities. Unfortunately, SEU
SHANGHAI 5,380 SQ FT 3 x AVERAGE
dwelling is a relatively modest 4,600 sq ft, this demand is assured for the foreseeable
SEU
this is compensated by an enormous 21,500 future. We increasingly expect that some of HONG KONG 5,200 SQ FT 5 x AVERAGE
sq ft mansion in the nearby countryside. this demand will find its way to ‘new world’
MOSCOW 4,630 SQ FT 4 x
SEU
AVERAGE
cities as well as the ‘old’in future.
VALUE RANKING
In Hong Kong, the rarest commodity on the GLOBAL BILLIONAIRES
island is houses on The Peak, and Southside.
BILLIONAIRE VS £ PER SQ FT FOR
Although they rank among the smallest EXECUTIVE UNIT BILLIONAIRE PROPERTY
World Class billionaire properties (at around
● BILLIONAIRES
5,200 sq ft), each of those square feet is the ● SEU
most expensive in the world.Tokyo is the
HONG KONG 6,700
200
next most expensive, due to exceptionally TOKYO 5,190
high land values in central Tokyo, although it PARIS 3,270
is not a market known for international LONDON 3,090
billionaires (most would be Japanese).
MOSCOW 2,520
Billionaire’s properties tell a different story 150
to the executive unit.The ultra prime, NEW YORK 2,270
billionaires markets in all cities out-performed SHANGHAI 1,320
during the boom of 2007 and have also SINGAPORE 1,000
out-performed the SEU in the six months to MUMBAI 710
June 2011.This reflects the rate at which new 100 DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN
billionaires have been created across the globe 05 06 06 07 07 08 08 09 09 10 10 11
SYDNEY 590
and the rate at which they have invested in
global real estate – in both emerged ‘new CAPITAL GROWTH OF
world’cities and in established ‘old world’ones BILLIONAIRE PROPERTY -2%
like London, Paris and New York. 83% 10% ● DEC 05 - DEC 10 11%
HONG KONG ● DEC 10 - JUL 11 TOKYO

PROSPECTS FOR
FUTURE INVESTMENT
These established western markets have
49% 23% 38% 3% 110% 2% 26% 0%
PARIS LONDON MOSCOW NEW YORK
seen steady growth but not the same volatility
as cities in the ‘new world’, making them
attractive ‘safe havens’for billionaires’wealth.
We anticipate that Sydney, for example, has
32% 3% 144% 16% 138% 7% 21% 40%
SHANGHAI SINGAPORE MUMBAI SYDNEY
this potential in the Pacific region.

- 17 -
SAVILLS.COM

WORLD CITIES REVIEW

WHEN THE CITY IS NOT ENOUGH...
IN SOME CITIES LEISURE PROPERTIES ARE AN ESSENTIAL PART OF THE DEAL

B
ig cities have many attractions and This index is an eclectic mix of Thai city and the way its residential markets
may be the sole place of residence resort villas, Russian dachas, English have little to do with the domestic
for half of the world’s population country houses and French Riviera economy. Second homes nestled in a
0

but many wealthy city enclaves are still estates. Nevertheless, these residential city’s hinterland are more prone to the
empty at weekends. properties can be seen as an important condition of the domestic, and even the
The tradition of spending the weekend component of World Class city life. rural economy, rather than the wealth
in the countryside is well-established in being generated in the city state.
many ‘old world’ cities like New York, UNDER PERFORMANCE It is not surprising then that World
Paris, London and Moscow. It is likely Leisure property has not seen the same Class leisure property experienced the
that the CEO in our executive unit, who level of performance as the main city greatest growth during the global
occupies a small apartment in Paris or residences. The leisure index increased economic boom period in the years up
Moscow during the week, would have a by only 33% between December 2005 to the end of 2007 but, as domestic
second home in the country. and June 2011, compared to 77% in the economies suffered more in the global
Those in Asian city states like Hong city index over the same period. This recession of 2008, leisure properties fell
Kong and Singapore are more likely to reflects the singularity of the World Class more – averaging -12% compared to -6%
travel to neighbouring countries such as in the city. Leisure property is a
Thailand, Malaysia and Indonesia to discretionary purchase and was one of
enjoy their second homes.
❝ Leisure property the first luxuries to go in the downturn.
For the Global Billionaire, meanwhile,
is a discretionary Some of the countries of South East

purchase and was
a leisure home forms an integral part of Asia where leisure properties are situated
overall accommodation needs. We have have not seen the same levels of value
measured the leisure accommodation of one of the ﬁrst growth, hence the World Class leisure
both the CEO and global billionaire
households in our World Class leisure luxuries to go in index has not received the same boost as
the cities index. It has yet to return to its
properties index. the downturn ❞ 2007 peak.

HOME FROM HOME
THE GLOBAL LEISURE VALUES INDEX

180
● CITY PROPERTY
● LEISURE PROPERTY

160

140

120
INDEX

DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN
05 06 06 07 07 08 08 09 09 10 10 11

- 18 -
SAVILLS.COM

world cities review

ExPErT commENTarY
savills agENTs arE aT THE HEarT of THE global ProPErTY marKET

Hong kong london Moscow MUMBAi new york

raymond lee Jonathan Hewlett Alexander shatalov Jatin Patel elizabeth stribling
savills Hong kong savills london intermark savills savills india stribling Associates
+852 2842 4518 +44 (0) 20 7824 9018 +7 (495) 775 22 40 +91 9958 000 578 +1 212 452 4400
rlee@savills.com.hk jhewlett@savills.com a.shatalov@ jkpatel@savills.com estribling@stribling.com
intermarksavills.ru

❝Hong Kong’s real ❝The world is using ❝closely linked to ❝ mumbai is making ❝ New York’s
estate is absorbing the london as a safe commodities markets, the transition from a attractions, currently low
wealth of the asia haven store moscow’s real estate is major national city to prices and a favourable
Pacific region❞ of wealth❞ a further play on the fully-fledged global exchange rate, mean the
wealth created in the city and its real estate city is poised to attract
cis’s main industries❞ prices reflect this❞ global HNWi❞
PAris sHAngHAi singAPore sydney tokyo

Jean claude caputo Albert lau christopher Marriott shayne Harris chris Mancini
riviera estates savills shanghai savills singapore savills sydney savills tokyo
+33 (0) 493 874 115 +(8621) 6391 6688 +65 6415 3888 +61 (0) 2 8215 8879 +81 (0) 3 5562 1700
jc.caputo@ albert.lau@savills.com.cn cjmarriott@savills.asia sharris@savills.com.au cmancini@savills.co.jp
riviera-estates.net
❝The creation of new ❝High demand from ❝a strong investment ❝Tokyo has joined the
❝Paris is rivalling wealth in china has overseas occupiers and proposition with all ‘old world’ economies
london to attract made shanghai and limited space keeps the advantages of an and its land offers a
buyers who seek ‘old its real estate a rents and capital ‘old world’ city, in stable investment
world’ stability❞ showpiece of the values high❞ the booming asia proposition❞
booming economy❞ Pacific region❞

rEsEarcH coNTacTs

yolande Barnes simon smith
Paul tostevin ptostevin@savills.com
savills residential research savills research & consultancy
rebecca gill rgill@savills.com
+44 (0) 20 7409 8899 +852 2842 4573
sophie chick schick@savills.com
ybarnes@savills.com ssmith@savills.com.hk

insights is published on behalf of savills (l&P) ltd by Blue door Media ltd, bluedoor-media.co.uk. All information correct at time of going to press.
All rights reserved. Articles may not be reproduced without written permission from savills (l&P) ltd. while every care is taken in compiling the content, neither the
publisher nor savills (l&P) ltd assumes responsibility for effects arising from this publication. Property Misdescriptions Act savills recommends applicants discuss their
interest in a property with the negotiator who can answer your specific questions and advise if it is under offer. This is important if you are contemplating travelling some
distance. All descriptions, dimensions, references to condition and permissions for use and occupation, and other details are given without responsibility, and any intending
purchasers or tenants should not rely on them as statements of fact, but must satisfy themselves by inspection of the property. Investment advice The information and opinions
contained in this magazine do not constitute professional advice and should not be relied upon. specific advice relating to your individual circumstances should be obtained.

- 19 -
savills.com

❝ Residential markets in
our World Class Cities
have more in common
with each other than the
mainstream markets of the
countries in which they
operate ❞

Savills - Insights - World Class Cities

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