A list of the top 10 places in the world for real estate investment was recently published by Forbes magazine. The Association of Foreign Investors in Real Estate (AFIRE) surveyed its 200 members, who own about $700 billion worth of property around the globe, to figure out where they are finding the best investment opportunities.
The list includes some of the most expensive cities in the world. Prime property in London and New York costs slightly more than $15,000 per square meter, according to Global Property Guide. A similar property in Paris, Hong Kong, Tokyo or Singapore costs more than $10,000 per square meter.
Tokyo, London and Hong Kong also make it into the top 10 cities with the highest cost of living, according to a recent study released by Mercer. Others are not too far behind, with Paris coming in at 12th place, Singapore at 13th place and Sydney at 15th place on Mercer’s list. The study uses New York City as the base at a score of 100 and goes on to score 145 cities around the world.
Shanghai and Munich are by far the least expensive cities on Forbes' list of the top 10 places to invest.
1. New York City, U.S.
Parts of the New York property market may experience a slow down
New York is still going strong but parts of the property market will experience a slowdown, according to a
New York Times article. While Wall Street makes up only 5 percent of the total jobs in the city, it produces 23 percent of the city’s total salary. The spending pattern of Wall Street workers is a good economic indication for the city as well as the real estate market.
Traditionally, financial workers tend to spend their bonus money on property. Bonuses from 2007 should remain flat; this would help the housing market remain afloat in 2008. The effects of the credit crisis will be felt in 2009, as workers begin to see their bonuses disappear.
New York, which is also the base city for the Mercer study, comes in at 22nd place on the cost of living list. The city has one of the most expensive prices for apartment buyers, with property in prime locations costing about $15,933 per square meter, according to Global Property Guide.
2. London, United Kingdom
Housing prices in London fell by 2.5 percent just this June, according to the Evening Standard (U.K.). The average house in the city sold for $20,000 less than it did in the month of May. House prices are expected to fall by as much as 25 percent by 2010, according to a report by Oxford Economics. However, the same report forecasted a 15 percent rise in prices by 2013.
With a score of 125, London comes in third place, after Moscow and Tokyo, on the Mercer cost of living list. Prime location apartments are the most expensive in the world, ranging from $15,202 to as high as $24,250 per square meter, according to Global Property Guide.
3. Washington, D.C., U.S.
The Washington, D.C. residential market is showing falling prices, similar to other cities in the rest of the U.S., according to Washington Business Journal. Prices fell an average of 15 percent by May 2008 compared to the same period in 2007, according to Standard & Poor’s/Case-Shiller Price Index.
While the housing market has been impacted by oversupply and bad loans, the commercial sector doing well thanks to government generated business in the capital, according to Forbes magazine.
D.C. wasn’t assessed by both Mercer and Global Property Guide studies.
4. Paris, France
Demand for apartments continues to rise past supply in Paris
Just like most other markets around the world, the
French housing market is also suffering from the effects of the credit crunch. In the first six months of 2008, prices fell 2.6 percent but rose by 3 percent in June, erasing the decline seen in the first two quarters of the year, according to an article at
French-Property.com.
The occupancy rate of the commercial market in Paris is at its highest, according to Forbes magazine. The sector will see rising rental prices for as long as demand continues to outstrip supply in the city, as is now the case.
Paris comes in at 12th place, right before Singapore, on the Mercer cost of living list, scoring 109.4. Prime location apartments are sold for about $13,826 per square meter, according to Global Property Guide.
5. Shanghai, China
Both the housing and the residential sectors in Shanghai continued to do well, according to a report by Jones Lang LaSalle. Retail properties located in prime areas have a zero vacancy rates while a robust demand remains. Office rents for the city are up by 2.4 percent over the second quarter. Residential rental market remains strong.
Shanghai comes in at 24th place, right before the famed European city of Amsterdam, on the Mercer cost of living list, scoring 98.3. Prime location apartments cost about $3,318 per square meter, according to Global Property Guide, making Shanghai the least expensive city for apartment buyers on Forbes magazine’s list of the 10 best places to invest.
6. Tokyo, Japan
There are some signs that show the global subprime meltdown is affecting the Tokyo real estate market. Japanese financial firms lost about $600 billion in the crisis by the end of 2007, according to Japan Inc, a magazine that focuses on business issues in the country.
There are fears that rising vacancy rates may result in lower rental yields followed by a price fall in the property sector. However, negative property trends in the Tokyo market are expected to be only in the short term. Japan still has plenty of investors waiting to buy real estate on the down, likely offsetting any dips in the market.
Tokyo comes in second place, behind only Moscow, on the Mercer cost of living list, scoring 127. Prime location apartments are sold for about $11,870 per square meter, according to Global Property Guide.
7. Singapore
While growth office and residential property sectors are expected to slow down, retail space is still a rising market in Singapore, according to Property Guru, a website covering the city state’s real estate market. The rising salaries of its citizens and the growing tourist industry have kept the retail market robust.
The number of tourists to Singapore increased 3 percent between 2007 and 2008, according to the Singapore Tourism Board, which is aiming to increase its tourism industry by creating 100,000 jobs in the sector by 2015 to help reach the goals of 17 million arrivals and SGD$30 billion in tourism receipts. The medical tourism industry in Singapore has provided the tourism sector with a boost and medical properties with fast appreciation.
Singapore comes in at 13th place, right after Tokyo, on the Mercer cost of living list, scoring 109.1. Prime location apartments cost about $11,800 per square meter, according to Global Property Guide.
8. Munich, Germany
Munich's market has grown above Germany's national average
The
property market in Germany, especially in the cities, is expected to only be affected mildly by the global credit crunch, according to Property Wire, a global property news service. The Munich market has grown above the national average over the past couple of years and is expected to remain stable with real estate in German cities predicted to grow 3 percent to 4 percent over the coming years.
Munich comes in at 37th place on the Mercer’s list, scoring 93.1, making it the cheapest city in terms of cost of living on Forbes' list of the 10 best places in the world to invest. Prime location apartments cost about $3,613 per square meter, according to Global Property Guide.
9. Sydney, Australia
Prices are rising in the leasing market in Sydney, according to the Sydney Morning Herald. Rents rose by 8 percent in the second quarter of 2008. However, housing prices will continue facing tough market conditions over the next year as the credit crunch persists. The rental market is also expected to sag as demand in the middle and top markets begin to decline over the rest of the year.
Sydney comes in at 15th place, right after Israel’s Tel Aviv, on the Mercer cost of living list, scoring 104.1. Prime location apartments are sold for about $7,085 per square meter, according to Global Property Guide.
10. Hong Kong, China
Apartment transactions in Hong Kong are expected to fall because of inflation and a weak stock market, according to a recent Bloomberg article. The total number of transactions is expected to dip to around 6,100 in July from 7,167 in June, the lowest level since September 2007.
Hong Kong comes in at 6th place, after Seoul, South Korea, on the Mercer cost of living list, scoring 117.6. Prime location apartments cost about $12,599 per square meter, according to Global Property Guide.
