Moscow
Dependence on local ultra rich market
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.
Moscow’s real estate markets are increasingly reliant on domestic demand and investment as Russia finds itself marginalised. The residential markets posted modest price increases, while the office sector, hit by falling demand from foreign occupiers, saw price falls of 8.6% in the first part of 2014.
2020 vision
Domestic demand: Moscow will face an increasing reliance on local money at a time when wealth generation in the country is slowing. A small pool of static, domestic, ultra rich may result in stagnation in the real estate markets.
Regeneration: The legacy of industrial areas in central parts of Moscow present opportunity for redevelopment to both residential and office use. This will help to support an expansion of the city’s prime residential markets.
Sporting events: The 2018 FIFA World Cup will put international eyes on Moscow and will be a catalyst for some major infrastructure improvements in the city. Nevertheless, opportunities for overseas inward investment will remain limited.
Sydney
Investor speculation continues to push values in the prime sector
Sydney’s real estate markets enjoyed growth at a time when many other western markets were falling. As a consequence, recent price movements are off a high base. Office markets were flat in the first half of 2014, after a strong 2013. Affordability in the mainstream residential markets is stretched, dampening price growth but continue to record small increases. Meanwhile, investor speculation continues to push values in the prime sector, with strength in the super-prime market.
2020 vision
Demographic change: While apartments have been a popular choice with downsizing and empty nesters seeking to release equity, Generations X and Y are seeing apartments as a more permanent living option, supporting the rise of owner-occupier demand.
Densification: ‘City’ Sydney, or high-rise property, is set to perform best over the next five years. A strong residential market is creating the expectation of capital gains, buoyed by low vacancy rates, historically low interest rates and relatively attractive yields for investors. Development investment opportunities will be focused on an intensification of the centre.
Economy: Australia’s economy has cooled in recent years as Asia has slowed and global demand for raw materials has declined. Interest rate rises are on the horizon and, coupled with a slowdown in occupier demand, the market is likely to see lower levels of growth. The test will be whether Sydney opens up its real estate market further to attract overseas money.
Dubai
City’s long-term prospects more positive after a decade of boom and bust
Dubai has had a turbulent time over the past decade, experiencing a boom and bust of an almost unparalleled scale. But as the city matures and finds itself better established on the world stage, its long-term prospects are looking more positive.
2020 vision
Geopolitics: Dubai is establishing itself as a safe haven in the Middle East. In the office sector, general political instability in the region has pushed more occupiers to Dubai, resulting in lower vacancy rates in the prime districts. But the emirate also benefits from investment from the west and is a popular second-home destination.
Market regulation: Dubai may have experienced extraordinary price growth in recent years, but property values are still substantially less than in other major world centres. The Federal Mortgage Cap (off-plan purchases are now limited to 50% of loan-to-value), coupled with a doubling of the property registration fee (albeit to a still modest 4%) is translating into a slowdown in the number of transactions recorded, bringing some market stability.
Mega projects: Dubai will host World Expo 2020, which is anticipated to generate 277,000 new jobs and inject US$40 billion into the economy. This has instilled confidence in the real estate markets and has kick-started major projects shelved during the global economic downturn. Palm Deira has been reborn as Deira Island, providing residential, hospitality and retail development opportunities. New schemes will be supported by major infrastructure investment, including an extension to the Dubai metro and new river crossings.