Wealth Blog

Luxury residential opportunists count rewards

PUBLISHED : Monday, 15 April, 2013, 5:55pm
UPDATED : Monday, 15 April, 2013, 5:55pm

Global luxury residential markets are always interesting. It really does indicate where the wealthy are hanging out, migrating to and moving away from. The never-ending search for safe haven investments keeps pushing prices up, in spite of stock market blips and financial crisis fallout. It seems you just need nerves of steel and the courage to jump in at the bottom. Whatever happened to the dreadful doom and gloom in the US property market only a few months back? Last week in New York all anyone could talk about was how it was simply too expensive to live in town any more. Formerly cheap arty areas like the lower East side are cheap and full of artists no more. Where the artists have gone is anyone’s guess but it’s wall to wall city suits now. New Yorkers are scathing about the bridge folks, those who have been hounded out of Manhattan to places like New Jersey by property prices, but that’s reality. With them have gone the Mom and Pop shops and rerstaurants, driven out by the escalating rents. New Yorkers are having exactly the same conversations as we are here in Hong Kong.


Meddling governments achieve little

Growing global wealth has kept governments active, trying to limit price growth and stop bubbles developing but their efforts seem cosmetic at best.  A certain strata is getting richer and is prowling the planet looking for real estate investments.

Knight Frank’s latest Wealth Report shows a polarised global market, with a third of the locations in their Prime International Residential Index showing prices rose during 2012, despite mixed economic fortunes.

But they found half of their reported locations showed negative growth, not surprisingly in Europe. Particularly in the second-home hubs, although even there, less greedy prices have begun to attract new investment.

Asia-Pacific remained the poster boy for positive news in the luxury residential sector in 2012, with, Knight Frank found, five of the year’s top 10 growth markets. First came Indonesia led, with stunning performances in both Jakarta (+38%) and Bali (+20%). Jakarta was fuelled by continued strong GDP growth, which has topped 6 per cent for five out of the past six years, boosted by stellar growth in middle-class wealth. Increased access for overseas buyers could keep the market afloat this year. Thailand did well at 9.4 per cent growth last year in Bangkok and 4.7 per cent in Phuket, buoyed by low supply and rising investment interest, according to Knight Frank. Imagine if you had had the courage to buy just after the 2006 tsunami in those locations - you’d be laughing now.

Last year’s Wealth Report highlighted the importance of the Chinese housing market to the global economy because of the booming construction sector driving commodity demand. But in 2012 the prime Chinese centres saw mixed fortunes, with double-digit growth in Guangzhou and Shanghai set against significantly lower growth in Beijing.

Beijing, and other big cities are grappling with government intervention to cool the market, such as limits on multiple home ownership, mortgage caps and, in some places, a crackdown on non-resident buyers. But in spite of this, the amount of money chasing prime property in Shanghai and Beijing has kept prices rising in both cities during 2012. It’s mirroring Hong Kong, where chief executive CY Leung’s 15 per cent stamp duty for non-permanent resident buyers, Knight Frank observes that price growth still nearly doubled from 4.6 per cent in 2011 to 8.7 per cent in 2012. Though in fairness, this did not kick in til the latter part of the year. So where else should investors look for safer property havens? The Middle East, it seems, with Dubai standing out with 20 per cent hikes the price of luxury villas during 2012. Things could not have not looked more gloomy than in Dubai during the global downturn between 2008 and 2009, so it just shows those brave and patient enough to jump in a t the bottom of cycles come out on top.