Wealthy property investors set to target less obvious city locations, report suggests

Melbourne, Tel Aviv and Chicago could outperform other prime property markets in top world cities in the next few years as global investors seek alternative locations, it is claimed.

The report latest report produced by developers Candy & Candy, Savills World Research and Deutsche Asset & Wealth Management  identifies 12 cities around the globe with the potential to show strong residential property price growth as they become more fully invested in the next few years.
Prices in these rising cities are generally much lower than in the world cities, which make them more accessible and attractive to yield seeking real estate investors, the report points out.

The list ranges from well established cities such as Melbourne, Australia, to centres in developing economies such as Chennai, India, that have a high number of ultra high net worth residents.

Top of the list is Tel Aviv, followed by Melbourne, Miami and Chicago. Dublin, Panama City, Beirut, Istanbul, Cape Town, Jakarta, Lagos and Chennai, make up the rest of the list.

‘For many ultra high net worth individuals real estate has become a unique asset class, but investment to date has focused on prime property in the top tier world cities which have shown record market growth,’ said Nick Candy, chief executive officer of Candy & Candy.

‘Real estate will continue to play an important part in global investment with investors now looking beyond established safe havens and prime world cities,’ he added.

According to Yolande Barnes, director of Savills World Research, who conducted the analysis, investors are becoming more bold in their choice of location. ‘As prime real estate in many premier cities has become more fully valued, emboldened investors are now spreading their wings and looking for high yielding secondary properties in those cities as well as starting to consider the value of second tier cities in counties with strengthening economies,’ she explained.

‘This more adventurous approach is likely not only to provide higher income returns but also the opportunity for significant capital growth. Real estate values will grow as new cities all over the globe rise on fortune’s wheel. Property rents and values will rise in line with new and growing economic strength,’ she pointed out.

Dario Schiraldi, head of Deutsche Asset & Wealth Management’s Global Client Group, confirmed that the firm’s wealthy clients are increasingly seeking locations outside the mainstream to broaden their real estate portfolios.
‘Demand for investment opportunities in both traditional and rising markets is very strong. Real estate fundamentals are improving with the global economic outlook and deal volume is picking up,’ he said.

Beyond the purely economic, the report identifies certain characteristics that add to the attractiveness of these cities. Some of those that stand out include English as a first or second language; the presence of new tech industries and financial centres; favourable conditions for international companies; and a large, young and well educated population.

The report also examines the property purchasing habits of the ultra wealthy. Three markets, Germany, Japan and the United States, top the list as the global locations with the highest value of direct real estate investment by ultra high net worth individuals. Together they account for 39% of all UHNWI global real estate holdings.
It also identifies those locations that have been the biggest recipients of private real estate wealth. Together five cities, Hong Kong, London, Moscow, Singapore and New York, account for 40%, or $2.2 trillion, of all global ultra high net worth individual real estate holdings.

Hong Kong, with the weight of mainland Chinese investment pushing at its borders, receives the most at $798 billion, followed by London, the city identified as having the broadest global reach at $676 billion.