The rising surge of urban living is leading to heightened demand for prime residential properties in key global cities, according to a new luxury residential property report from CBRE called Global Living Survey: Global Cities Compared, which compares the world's key global cities favored by high net worth individuals. Apartments for rent
According to the survey, London currently has the highest average prime residential new-build pricing, at $3,380 per sq. ft., followed by Hong Kong and New York, with average costs of $3,290 and $3,040, respectively.
Hong Kong and London alternate between first and second place in the residential rankings depending on market conditions. However, after the introduction of sales taxes in Hong Kong last year, transactions plummeted to a 17-year low, resulting in a 5-10% drop in prime property prices over the year.
Despite this, there are indications that the Hong Kong market may be improving. Prices have risen in the mainstream markets, according to Marcos Chan, Head of Research at CBRE Hong Kong, Macau, and Taiwan, suggesting significant pent-up demand fueled by expectations of more easing from the government, including favorable stamp duty tax for first-time buyers and low loan rates. Mr. Chan stated, "Improved mood connected to recent capital market activities has also supported the market."
"Market cooling measures continue to have a significant impact on Hong Kong's residential sector. As a result, many would-be speculative buyers have been weeded out, as has a minor deterrent for offshore buyers, and the mass market is now dominated by local buyers ." "Mr. Chan continues.
With the rise in urbanization and the resulting tremendous population growth—Beijing and Kuala Lumpur's populations expanded by 18% and 25%, respectively—there has been a boom in housing demand. While Tokyo and Beijing were able to develop enough housing to meet demand, development rates generally fall short of population expansion.
In Bangkok, the general condominium market has been impacted by political upheaval since December 2013, and with over 100,000 condominium units completed in 2014 and 2015, this is a critical test for the midtown and suburban market at a time when demand is low.
According to estimates, about 300,000 people in Vietnam are wanting to buy property in Ho Chi Minh City; however, supply is concentrated at the upper end of the market, while demand in the general market outstrips supply. On the other hand, there are roughly 17,000 unsold units.
Meanwhile, enormous population growth in Sydney is driving domestic demand—the city's population is forecast to expand at 1.7 percent per year until 2029, or by 25 percent overall. This increases the strain on housing by 0.2 percent per year over prior historic levels. Despite the fact that approximately 26,600 units are now under construction around the city, there is a significant backlog—the city is severely limited by land availability due to geographical constraints, zoning, planning restrictions, and adequate infrastructure.
Housing demand is notably low in Hong Kong, where one house is created for every four new residents in a population of 7.2 million.
In Hong Kong, supply and demand are out of balance.
In Hong Kong, private housing supply is expected to expand by roughly 17% year on year in 2014, equating to an additional 2,270 units when compared to 2013 forecasts. This would bring the total housing supply for the year to 15,820 units, which is still considerably below the government's 20,000-unit annual objective.
Even though this additional supply is unlikely to have a significant impact on overall mass market prices this year, its geographic concentration is likely to have an impact at a sub-market level, with a focus on the New Territories—particularly Yuen Long, Tsuen Wan, and Sha Tin—which will account for 40% of all new supply. Slight pricing fluctuations may be evident in some locations.
While several stamp duty restrictions implemented last year were intended to discourage foreign buyers from entering the market, the global elite continue to be interested in Hong Kong. CBRE's Head of Residential Research, Jennet Siebrits, says, "Buyers from the United Kingdom are becoming more active in international markets. Hong Kong and Dubai are two of the most attractive destinations for wealthy expats."
The gap between different segments of the Hong Kong market, both in terms of attitude and underlying dynamics, is expected to remain in the future, according to CBRE. Given the constraints on existing stock and future supply, the luxury end of the market is likely to be relatively resilient, although activity levels in the primary market are expected to increase, reflecting a pick-up in supply and the fact that developers are still giving discounts.