- City Fajr Shuruq Duhr Asr Magrib Isha
- Dubai 05:23 06:41 12:10 15:09 17:32 18:50
The script for the world’s residential property markets in 2008 appears to go like this: house prices will fall thanks to sub-prime mortgage crises, spreading to cause defaults on unsecured personal debts, fuelling recessions in national economies, thus creating corporate collapses and volatile stock markets. Result? Disaster.
Yet despite this pessimistic scenario – not borne out so far, by the way – one sector of the residential industry simply soars ahead. This is the ‘prime’ city market.
Figures from British real estate consultancy Hamptons International, a subsidiary of Emaar, show prime areas of capital and other major world cities have hit new highs.
London leads with its West End, Knightsbridge, Mayfair and Holland Park prices now exceeding $80,000 (Dh293,808) per square metre. “Demand is particularly high for apartments in new developments [but] the number of developments available is currently very limited” claims Rob Bruce, Hamptons’ head of research.
“Successful financial markets, a welcoming tax regime for foreigners, airports with unrivalled international links, the universal language of English, and a positive global image… Britain has it all,” says David Stubbs, chief economist at the Royal Institution of Chartered Surveyors and one of Europe’s most respected property market analysts.
More than 65 per cent of Fortune’s Global 500 companies have chosen London as their European or world headquarters. London also has more foreign banks than any other city in the world. US business magazine Forbes says the number of British-based billionaires has risen from 33 in 2006 to 42 today – and the three richest are not even British. Little wonder, therefore, that there is plenty of global money to push the highest property prices even higher.
Savills, a realtor based in London, says Britons bought only 45 per cent of homes sold for $7m or over in 2007. Indians account for 11 per cent, west Europeans nine per cent, with eight per cent from the Middle East, six per cent from each of Russia and the US and three per cent from Ireland.
“Foreigners want a stake in London. The properties are of a high standard in this city compared to most others. The uber-rich have got high security and privacy – two musts for them – so they go from an underground car park directly to their home,” says Savills’ head of London sales Jonathan Hewlett. Yet intriguingly these stellar United Kingdom prices show what relatively good value real estate is elsewhere, even in those other ‘prime’ locations on the Hamptons’ league table.
Manhattan in New York, for example, is scarcely half the price of London; so far it has not become mired in the sub-prime crisis and the weak dollar has made it a target for well-heeled investors. It has also ‘extended’ its prime area with the conversion of the Plaza Hotel near Central Park South and Fifth Avenue into luxury condominiums and hotel suites, and the emergence of Columbus Circle as a new location with the Time Warner Centre and the new 15 Central Park West building. Dubai is just a fifth of the price of London, too, with demand from investors still likely to produce further long-term growth. India’s national economy booms at eight per cent a year meaning its current $11,000 psm ‘prime’ price appears a bargain compared to what it is likely to become five or 10 years from now.
Even primarily lifestyle markets, such as Marrakech, are likely to blossom as a rapid increase in budget airline services brings more tourists, and new schemes like the Four Seasons Residence resort sets higher standards than those seen before. Even so, ‘prime’ Marrakech is only a 14th of London prices.
But whatever major city you study, securing a ‘prime’ location is everything to the developer and investor alike. Proximity to good transport, retail and leisure facilities are key – meaning that newer, planned cities may in the long-term match or even exceed the value of older locations such as London, Manhattan and Moscow.
“Prime property is mostly down to location. Value erosion can be swift as you move away. It can drop $10,000 per square metre or more in a few hundred yards [therefore] it is common to see developers artificially forcing the market into new areas” says Rob Bruce.
With interest rates having modest direct influence on the wealthiest buyers, the top-end international residential market has the momentum to continue on a high throughout 2008.
This is one sector, at least, that isn’t sticking to the credit crunch script.
Graham Norwood is property correspondent for The Observer newspaper of London
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