This year, Knight Frank’s research has allowed it to include 90 of the world’s key luxury property markets in its Prime International Residential Index (PIRI), up from last year’s 80. The main theme that emerges from their analysis is a widespread strengthening of values. Last year prices fell in 39% of locations, compared with almost half in 2012. A fifth of markets featured saw double-digit price growth in 2013 against only 15% the year before.

Across PIRI, the main division is between generally booming Asian markets, which dominate the top positions in Knight Frank’s ranking of price growth and the weaker European markets that account for 80% of all locations where prices declined in 2013.



Improving markets

While most of the positive news in Europe is centred on the key city markets, with London, Monaco and Vienna also hotspots, there are tentative signs of a recovery in the prime second-home markets. Key Alpine markets are seeing stronger conditions, with prices in Chamonix, Verbier and Gstaad rising by 8%, 6% and 3% respectively. The Italian Riviera, the western Algarve and the prime English country house market are also at the fore-front of the nascent recovery.



US insights

Values continued to rise across the US last year, with double-digit growth through 2013 in Los Angeles, New York and San Francisco. While Miami’s price growth has slowed down from 20% in 2012 to 4.3% in 2013, property analyst Jonathan Miller is still positive about the outlook for the city. “Demand for prime Miami property remains strong and price growth is set to keep pace with the key East and West Coast markets in 2014.”



Beyond Borders

The ongoing globalization of UHNWI demand for prime property will be joined by a related phenomenon in 2014: the growing global activity of large, mainly Asian developers. Investors from China, India and Hong Kong will increasingly recognize home-grown brands when they buy luxury developments in London, New York, Sydney and Vancouver.

Growth opportunities, knowledge, diversification and brand building have encouraged a new wave of Asian capital, targeting mature development markets in the world’s leading cities. In 2013, over 76% of total inbound capital into the development markets of the UK, the US and Australia originated from China, Singapore, Hong Kong, Malaysia and India, according to property analyst Real Capital Analystics.



Global brands

So what lies behind this recent surge? With so few truly global developers, the race to establish a global brand is clearly one of the primary drivers. Real estate is a very complex product. Brands carry a lot of weight because they are able to convey a sense of quality and aesthetic. Another key driver for developers taking their first international steps is the opportunity to learn from more mature markets.



Preferred Markets

London, New York, Hong Kong, Singapore, Paris and Sydney will continue to be targeted by these increasingly outward-looking developers in the future. And with competition for prime sites likely to intensify as local capital in recovering economies starts to re-emerge, premiums for the best sites could continue to increase. For these large, well-capitalised  developers, their first exposure to global cities is unlikely to be their last.



Future prospects

Given the potential easing of cooling measures in some Asian markets in 2014. KF’s view remains that the volume of cross border purchasing activity is likely to increase in 2014, due to the increase in wealth and the desire of UHNWI’s to increase their exposure to property. This could well lead to the implementation of additional government control in other markets.

The most rapid of growth in demand in 2014 will markets will be the US, the UK, Germany, Australia and Dubai. Intra-European demand for cross-border purchases will increase in 2014. Safe haven flows from southern to northern Europe, especially into Germany and Austria, will continue but this will be matched by a growth in investors looking to expand in markets on the Eurozone periphery, especially Ireland, Spain and Portugal.


GLOBAL CITIES RANKED BY UHNWI POPULATION GROWTH 2013 - 2023
CITY
2013
2023
10 YEAR GROWTH
Ho Chi Minh City
90
246
173%
Jakarta
345
857
148%
Ordos
22
53
141%
Mumbai
577
1,302
126%
Delhi
147
321
118%
Foshan
25
53
112%
Ningbo
35
72
106%
Xiamen
60
121
102%
Taizhou
20
40
100%
Chongqing
96
191
99%
Dongguan
24
46
92%
Suzhou
42
80
90%
Jiangmen
23
42
83%
Chengdu
120
217
81%
Fuzhou
67
121
81%
Wuhan
111
200
80%
Nairobi
65
116
78%
Hangzhou
563
1,002
78%
Wenzhou
109
193
77%
Tianjin
155
265
71%
Dalian
89
149
67%
Changsha
118
195
65%
Guangzhou
311
504
62%
St. Petersburg
99
160
62%
Buenos Aires
264
425
61%
Marrakesh
15
24
60%
Xian
61
96
57%
Houston
777
1,217
57%
Rio De Janeiro
550
856
56%
Singapore
3,154
4,878
55%
Qingdao
65
100
54%
Nanjing
192
1,542
53%
Shanghai
1,028
1,651
50%
Munich
1,113
1,651
48%
Bangkok
456
668
47%
Beijing
1,318
1,872
42%
Johannesburg
285
403
41%
Sao Paulo
1,310
1,843
41%
Shenzhen
377
528
40%




MUMBAI SPEARHEDS THE INDIA GROWTH STORY

  • India is expected to witness more billionaires than countries such as the UK, Germany, Hong Kong and France by 2023 as per the Knight Frank Wealth Report 2014.

  • India is on the sixth spot in the top 10 countries for billionaires as of 2013 with 60 billionaires; expected to increase to 119 with a 98% growth by 2023.

  • India to experience 99% growth in the number of Ultra High Net Worth Individuals (UHNWIs) over the next decade.

  • The number of centa-millionaires in India expected to double over the next decade, witnessing a 99% growth from 383 to 761.

  • Mumbai is on the 4th spot with a 10 year UHNWIs growth of 126% among all global cities which is expected to increase from 577 to 1,302 by 2023.

  • Delhi on the 5th spot with a 10 year UHNWIs growth of 118% among all global cities; which is expected to increase from 147% to 321% by 2023.

  • Mumbai retains its position as the 16th most expensive city in the luxury home sector with an average price of 95.7 per sq.m.