Mumbai ranked among the cities of the future.
DATE: 31 March 2012
As pulished in DNA Property on 31st march, 2012
Quality of life, knowledge and influence, and economic activity are the key factors for the ultra-wealthy investing in property, says Knight Frank and Citi Private Bank’s sixth Wealth Report.
China will overtake the US to become the world’s largest economy by 2020, which in turn will be overtaken by India in 2050, it says.
The report states that the cities to watch in 2050 are the 400 emerging market ‘middleweights’, fast growing cities with populations between 200,000 and 10 million.
This dynamic group includes many cities that are not household names today: Linyi, Kelamayi and Guiyang in China; Surat and Nagpur in India; Concepcion and Belem in Latin America.
Cities of the future will include Cairo, Lagos, Johannesburg and Mumbai, as well as established global centres such as New York, London and Moscow. London, New York, Hong Kong and Paris are seen as the most important world cities for high-net-worth individuals (HNWIs).
Beijing and Shanghai are the cities with the most rapid growth in importance to HNWIs.
HNWIs from the Middle East and Africa rate Dubai as the location with the most rapid growth in importance, with HNWIs from Latin America rating Miami and Sao Paolo as strong contenders for future influence.
Personal security (63%) now ranks above economic openness (60%) in HNWIs’ choice of cities to live. Monaco remains the most expensive residential location in the world, with one square metre there now worth $58,300 (Q4 2011), followed by the prime locations in Cap Ferrat, London and Hong Kong.
The report confirms the relentless shift in wealth distribution towards Asia-Pacific: the region covering China, SE Asia and Japan now has more centa-millionaires (those with over US$100m in assets) than North America or Western Europe.
Emerging economies have continued to build their huge influence on the real estate markets in established locations: wealth flows from developing economies underpinned prices across the leading prime markets in North America and Europe including Miami, Vancouver and London in 2011. Knight Frank and Citi Private Bank expect further growth in interest in commercial property from HNWIs, forecasting US$74.1bn of private transactions globally in 2012 (a 5% year-on-year increase).
The newly wealthy from the world’s fastest-growing emerging economies rate stability, business transparency and education systems as the most important factors in a global city; prices of luxury housing in locations with this magic formula have been underpinned by their interest.
According to the report’s unique attitudes survey, lifestyle and investment remain the key drivers for luxury second-home purchases, with 16% of all HNWIs surveyed already owning a ski chalet, and 40% a beachfront property. The US and UK are the top second-home destinations for the rich.
Luigi Pigorini, CEO Citi Private Bank Europe, Middle East & Africa comments, "Wealthy individuals and families, especially those originating from Europe, the Middle East, Africa and Asia, have become extraordinarily global in nature. Many seek the rule of law and stability that make the UK a top choice for investment. With English a popular second language and a relatively weak pound, the global wealthy have confidently focused their interest on London and the wealth preservation it can afford.
"Investors seeking a more conservative strategy have gravitated toward high-quality properties in central business districts in cities such as Beijing, London, Munich, New York, Paris and Sydney. Conversely, for those willing to accept more risk, high growth markets, such as Asia and Latin America, may be able to generate more attractive returns relative to the US and Europe. Investors must remain cautious as global economic growth will continue to influence all property markets, and investors should measure their yield and return expectations taking growth into account."
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