Global billionaire activity in world real estate markets has been so intense over the past seven years that it has led to a doubling of residential property values in this sector.

Although overall, aggregated world values fell after 2007 and price movements seem volatile, recovery has been significant since 2009. As a result, billionaire markets have exceeded the growth seen in the mainstream markets of the same cities.

Driving growth

The activity of billionaires in international real estate markets reflects the creation of global wealth and the economic success of particular regions and cities. This means that the cities in newly emerged economies have significantly outperformed those in the “old world” economies of the US, Japan, Australia and Europe.

Only London’s ultra-prime market stands out among the “old world” cities as having shown significant growth since 2005, totalling 107%. New York’s billionaire real estate stands only 47% higher and Tokyo ultra-prime residential is only 8% more expensive (in local currency) than it was in 2005.

Rising commodity prices and the creation of new, ultra-rich classes in China and Asia have precipitated the highest growth in ultra-prime real estate values. Singapore and Mumbai stand out as having seen the highest growth in ultra-prime values since 2005 (at 232% and 176% respectively). Both grew from relatively low base values. The highest overall values are seen in Hong Kong. The record deal there was £8,200 (US$13,100) per square foot for a house in Deep Water Bay Road in 2011.

Billionaire Boltholes

Billionaire activity has been concentrated on high-end urban centres rather than leisure properties in the surrounding countryside or regional sunbelts. Consequently, the index for billionaire leisure homes has not yet quite recovered to its former 2007 peak and only stands 34% higher than it did in June 2005.

Ultra-prime is stabilising

2012 saw significant curbs imposed on billionaire buyers in some cities. This has resulted in slowdowns rather than falls in most of them. Singapore’s ultra-prime growth slowed to about 5% in the year, while Hong Kong’s stalled and London’s also slowed significantly, both in the second half of 2012. Moscow prices slowed alongside commodity prices, which are closely linked to the value of Russian ultra-wealthy individuals.

In France, threatened tax measures seemed directly to have curbed activity. Our ultra-prime index in Paris is down, nearly -8% on the year, while billionaire Riviera properties ended down -10%. Overall, the ultra-prime billionaire markets are stable. Real estate, especially in “old world” countries, is seen as a safe store of wealth. The US, in particular, looks ripe for growth.

Ultimately, the world’s richest inhabitants will continue to set up homes in the most cosmopolitan and wealthiest cities, which offer commercial advantages and quality of life. Leisure resorts and country property purchases tend to lag behind city values, but they have the potential for recovery. Leisure properties in the most fashionable billionaire boltholes and prosperous world regions are likely to see the highest growth.

Taken from
Insights: World Cities Review Spring 2013

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