Paris
Current market under-performance means opportunities for international buyers
What does the future hold for the rapidly changing global real estate market? We take a look at how our world cities will perform in 2020.
Real estate in Paris has been hampered as a euro-denominated asset in a country posting relatively poor economic performance. Unlike London, the city hasn’t been able to buck the trend of its hinterland and price growth has been subdued, although office rents have continued to increase due to a lack of supply in central locations.
2020 vision
Investment: Investor dislike of Hollande’s government continues to be a factor in current market under-performance, but this means there are significant opportunities for international buyers to take advantage of a weak domestic market. Prime property remains cheap compared to London and prices have room to grow. Limited development opportunities in historic central Paris will keep supply constrained.
Economy: Challenges lie ahead in consolidating public finances, improving competitiveness and reducing unemployment. Weak economic growth is forecast, which will bear on the city’s commercial real estate markets.
Tourism: Paris is one of the world’s most popular tourist destinations, attracting 32 million visitors per year, half from overseas. In 2013, 1.4 million Chinese tourists visited Paris, with 1.8 million expected in 2014 and 47% of money spent during their stay being directly on shopping. This has fuelled huge investment in the luxury retail sector, which will remain important in coming years.
Tokyo
Abenomics halted fall in asset prices and real estate gains momentum
Tokyo’s real estate markets continue to gain momentum after years in the doldrums. Residential capital values alone were up 3.1% in the first half of 2014 (more than all the growth in the previous seven years), while office rents grew 5.4% over the same period. Tokyo’s main attraction is still income streams rather than capital growth, the latter limited by global standards.
2020 vision
Foreign investment: Foreign investors, attracted by Japan’s revived growth, will help finance new projects in the city. Cross-border investment made up 14% of investment in Tokyo’s office market in 2013, up from just 5% in 2011. Residential schemes are also attracting higher levels of foreign investment from Asian neighbours. The number of these investors is set to grow and will remain focused on income.
Urban renewal: The 2020 Tokyo Olympics will help to maintain the momentum of Abenomics through the medium term. The majority of new infrastructure will be located in the Tokyo Bay area, a local catalyst for new condominium and commercial development.
Domestic market: The economy in Japan is projected to follow a moderate growth trend for the foreseeable future and demand for top-quality office space is expected to remain high. An upward trend in rents is supported by robust demand across all the major industry sectors, coupled with restricted availability in many submarkets.
Singapore
Outlook remains challenging for rest of 2014 as market controls set to feature
Like Hong Kong, Singapore’s prime residential markets have slowed, while the mainstream market has continued to grow, driven by domestic owner-occupier demand. Economic growth has slowed in the city state, but Singapore’s diversified economic base underpins a robust office sector. Rents increased by 7.3% in H1 2014, second only to Dubai among the cities we monitor.
2020 vision
Market controls: Cooling measures continue to bear on Singapore’s prime residential markets and the outlook remains challenging for the rest of 2014. Market controls are set to be a feature of Singapore over the coming years as it battles market affordability in a bid to remain competitive on the global stage.
Restricted land: Limited space, increasing wealth and a growing workforce will put pressure on land. There may be more relocation of lower value industry to Malaysia, where land, property and wages are cheaper. Singapore is set to become more rarefied, with Singaporeans protected by government access to housing. Employers will find it more difficult to attract and retain young talent from abroad because of the high cost of real estate.
High-tech infrastructure: With high-tech infrastructure and close proximity to some of Asia’s key growth markets, Singapore is a world leader in business and has a growing reputation in the biotech and energy sectors. According to the World Bank, Singapore ranks as number one for the ease of doing business.