Embargoed
Embargoed
23
Contents
Introduction
6-7
8-9
10-11
12-13
14-15
16-17
18-19
20-21
22-23
24-25
26-27
28-29
30-31
City snapshot
32-43
44-47
48-49
50-51
52-53
55
45
Introduction
The housing market in central London rebounded quickly in the
aftermath of the global financial crisis. In the following years it
outperformed the rest of London and the UK, with annual average
house price growth of around 10% over the past five years. As well
as local influences, this performance reflects a range of global
economic and geopolitical factors, with London benefitting from its
role as the worlds preeminent financial centre.
In our increasingly globalised society, world trends are becoming
inextricably interwoven with the local markets affecting sales
rates and prices. However, globalisation doesnt stop there; it also
affects the type of buyers and the type of product.
In this report we review the London residential property market
within its global context, and see how it competes with other world
class cities. We examine a range of issues that influence property
market performance. These include the broader economic
backdrop, overseas buyers, tax regimes, the prominence of the
private retail sector, and how our increasingly globalised way
of living has influenced residential design. We then complete
the circle with a brief look at commercial property as we seek to
understand London in its global context.
Jennet Siebrits
Head of Residential Research
CBRE
67
A global
economic
overview
Despite a choppy first half
of 2014, the forces acting on
the advanced economies are
positive and supportive of
value growth in the property
markets. Overall, with
interest rates expected to
stay low for the time being
there is a promising outlook
for the global economy.
Global growth may lack pace, but this means the cyclical
upward pressure on interest rates will be muted and
the long term trend is firmly down. These are good
conditions for global housing markets, particularly in
the advanced economies.
89
2,071
109
1,800
Munich
Amsterdam
London
New York
Beijing
828
26
2,000
218
30
331
325
541
79
Berlin
20
298
633
263
Tokyo
Dublin
33
393
160
76
357
590 815
Milan
36 389
Los Angeles
27
367
590
Bangkok
Paris
890
18
53
853
63
225
1,100
Hong Kong
Rome
Mumbai
28
301
590
Dubai
37
45
79
74
725
Sydney
405
53
Cape Town
Key
Kuala Lumpur
9
24
204
31
186
Johannesburg
331
15
334
Singapore
65
289
27
950
112
317
543
1,200
How does
global
residential
real estate
rank?
Hong Kong
1,950
New York
1,800
Sydney
1,200
London
2,000
Hong Kong
1,950
New York
1,800
Sydney
1,200
Singapore
950
Los Angeles
890
Tokyo
815
10 11
Hong Kong
Depending on respective market trends, Hong Kong and London regularly oscillate
between first and second place in the residential rankings. However, following the
introduction of sales taxes in Hong Kong, transactions fell to a 17 year low last year.
As a result, prime property prices have fallen by between 5 and 10% over the year.
However, there are signs that the market could be picking up. In particular, there have
been price rises in the mainstream markets. This reflects strong pent-up demand
buoyed by speculation of further easing from the government. Improved sentiment
related to recent capital market activity has also boosted the market.
Mumbai
725
London prime residential
prices increased by around
5
10
Milan and Rome 590
Paris
1,100
16% last year and now
stand at around 2,000 per
6
950
Singapore
sq ft. London is just ahead
of Hong Kong, which is
7
Top three
890
Los Angeles
in second place following
a tumultuous year in the
London
8
Chinese province. New York
815
Tokyo
Demand for prime property in London rebounded quickly after the 2007 financial crisis.
is around 10% cheaper, but
As a result,
price growth has significantly outperformed the wider market, with average
9
annual growth of around 9% for the past five years. While demand was initially buoyed
still head and shoulders
725
Mumbai
by overseas buyers, we have since seen a resurgence in domestic buyers who now
above fourth place Sydney.
make up around 52% of the market. There remains a fundamental lack of new housing
10
supply in London and this is putting continued pressure on prices. Despite talk of a
590 in the market, we expect activity to remain
Milan and
Rome uncertainty
possible Mansion
Tax causing
strong with total house price growth of around 30% over the next five years.
New York
In the wider market, house price growth in New York remains relatively muted, at
around 2.5% last year. However, the prime market is supported by overseas buyers
and domestic high net worths, who have given this segment of the market a boost.
Average prime prices are currently 1,800 in New York, which keeps it firmly in the top
three, just below Hong Kong, and well above Sydney in fourth place.
How does
global retail
real estate
compare?
New York
2,071
Paris
853
London
828
12 13
Hong Kong
2,565
New York
2,071
Paris
Melbourne
853
828
590
10
590
New York
Zurich
570
There is a very limited amount of space in Manhattans prime corridor of Fifth Avenue
between 49th and 59th streets. A couple of recent deals by Ralph Lauren and Valentino
further constrained supply. As a result landlords continued to raise rents on the few
existing spaces that are available.
Sydney
543
Melbourne
456
Moscow
418
Beijing
393
While outlets on Fifth Avenue remain the most sought after, there are other very vibrant
retail corridors in Manhattan. For instance, the Times Square retail corridor also has
very high rents, and would independently rank ahead of Paris on the global top 10
most expensive markets list.
570
543
456
In Hong Kong, domestic retailers continued to expand in the prime streets of Tsim Sha
Tsui, Mong Kok and Causeway Bay. In addition, the competition among international
9
brands
for prime locations remained strong. However, retailers are increasingly
418
cautious Moscow
about rental costs and the
slowing pace of retail sales growth. Retailers are
increasingly preferring to expand in shopping malls rather than high streets due to
lower10rent, better trade mix and guaranteed footfall. While sentiment is expected to
Beijing
stay largely
positive over the next393
12 months, occupiers may become more selective
on locations. Rental growth in the region of 5% is expected in tier-one streets on the
back of solid demand from retailers and limited supply.
Paris
The Paris market remains heavily polarized. Despite the significant cost to entry, high
streets remained the top targets for international retailers. Demand has been strong for
the limited supply of locations on prime streets, pushing up rents over the course of 2013.
Rue des Francs Bourgeois and Rue Saint-Honor both witnessed increasing interest from
retailers, as there is a very limited supply of available space on the Champs lyses.
How does
global
commercial
real estate
compare?
Prime office rents in
Hong Kong central have
increased by 2.3% over the
past year, ensuring Hong
Kong has both the highest
office and the highest retail
rents. In London, prime
office rents in the West End
have increased by 10.5%.
Beijing comes in third with
office rents of 80 per sq ft.
London Central
14 15
Beijing
79
Singapore
65
Hong Kong
131
London Central
109
Beijing
79
Singapore
65
Paris
53
Sydney
53
10
Top 7three
New York
109
53
Sydney
53
New York
52
Milan
36
Dublin
33
Kuala Lumpur
31
London
At 109 per sq ft, prime office rents in London rank the second highest globally. However,
on an occupancy cost basis, London surpasses Hong Kong at 164 per sq ft. This is a
13.5% increase over the year. This partly reflects development restrictions in the West End,
which keep vacancy rates comparatively very low. In addition, the improvement in the UK
economy has triggered a strong recovery in the demand for space. This demand, along
with the shortage of available space, has been putting upward pressure on prime rents
throughout 2013 and into 2014. We expect further growth in rents in 2014.
52
Hong Kong
8
Beijing
Office rents in Beijing have remained broadly unchanged over the year at 79 per sq ft,
and Beijings Finance Street ranks as the third highest prime rents (and at an occupancy
cost basis). In Beijings Finance Street there has been very little new prime office supply
since 2009. Meanwhile, market demand from domestic companies is growing rapidly,
especially from financial institutions. Little new supply is expected in 2014 and rents in
this market should hold firm, and perhaps rise, over the balance of 2014.
16 17
Owner occupied
49.5%
Museums
240
Tallest building
The Shard 1,004 ft
Most popular
girls name
Amelia
International airports
Heathrow / Gatwick /
City Airport / Stansted
Hotel rooms
110,000
Average cost of
a dinner out
50
Underground
stations
270
Passport
London
$
Current
population
8,173,941
Population born
overseas
35.3%
Owner occupied
38.8%
Michelin starred
restaurants
64
Share of millionaires
3.4%
Museums
83
Number of
commuters
3.2 million
Tallest building
One World Trade Center,
1,776 ft
Most popular
boys name
Oliver
Most popular
girls name
Sophia
International tourists
16.8 million
International airports
JFK / La Guardia &
Newark
Milk 1L
0.95
Hotel rooms
106,000
Cappuccino
2.43
Average cost of a
dinner out
44
Underground
stations
468
Passport
New York
$
Current
population
11,911,800
Population born
overseas
6.4%
Owner occupied
66.4%
Michelin starred
restaurants
67
Share of millionaires
4.6%
Museums
55
Number of
commuters
5.2 million
Tallest building
International Commerce
Centre 1,588 ft
Most popular
boys name
Noah
Most popular
girls name
Anya
International tourists
10.9 million
International airports
Chek Lap Kok
Milk 1L
0.83
Hotel rooms
68,753
Cappuccino
2.33
Average cost of a
dinner out
25
Passport
Hong Kong
$
Current
population
7,219,700
Michelin starred
restaurants
73
Share of millionaires
2.6%
Number of
commuters
2.8 million
Most popular
boys name
Liu
International tourists
13.6 million
Milk 1L
1.62
Cappuccino
2.42
Underground
stations
152
18 19
United Kingdom
231.9%
Australia
221.4%
Ireland
185.5%
Belgium
174.4%
France
149%
Norway
144.6%
Canada
133.9%
Netherlands
105.6%
Finland
Spain
82%
70.4%
Denmark
58.2%
United States
53.2%
Switzerland
37.6%
South Africa
19.2%
South Korea
11.3%
Italy
3.8%
-7.8%
Germany
400
300
200
UK house price
US S&P 500
FTSE 100
UK 10 year yield
US 10 year yield
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
100
2001
500
2000
600
1999
1998
30%
1997
1996
232%
Japan
-14.5%
1995
1994
20 21
The supply
and demand
imbalance
A surge in urban living,
against an increasingly
globalised context, has led
to heightened demand for
property in key cities across
the world. While in many
cities the level of residential
construction fulfils the
increase in demand, in some
cases, the level of new supply
is inadequate. This has
lead to upward pressure on
prices. Rising prices are in
turn intensifying demand,
as investors recognise
the acute investment
opportunity.
1m
Increase in Londons population
over last decade
Population growth has been driven
mostly by natural change, with more
people of child-bearing age staying in
the city. In contrast to historical trends,
a much smaller proportion has been
moving out of London to have a family. In
addition, there has been a considerable
net inflow from twenty somethings, given
the much greater employment prospects
in the capital compared with the rest of
the country.
The government has forecast population
growth to continue at this pace over the
next ten years, taking the total number of
people living in the capital to 9.3 million.
Furthermore, household formation rates
continue to outpace population growth,
reflecting the increasing prevalence of
smaller households, which is putting
additional pressure on housing stock.
200,000
New homes built in London
over last decade
This supply and demand imbalance is
at the heart of the housing debate in the
UK and is something that all political
parties recognise as a priority. Although
house building targets exist and various
governments attempt to stimulate supply,
the process of housing delivery remains
cumbersome, particularly given the
expensive and time-consuming planning
system. Finally, while the government has
historically helped contribute towards
the provision of low cost housing for
those who are on low incomes or are
unemployed, the private sector is now
wholly depended upon to do this.
Ratio of housebuilding to
population increase
London
Paris
0.2
0.25
New York
0.5%
Hamburg
4%
Hong Kong
0.28
Amsterdam
8%
Sydney
0.29
Berlin
3%
Berlin
Kuala Lumpur
Munich
Hamburg
New York
Paris
0.3
0.36
0.37
0.47
0.53
Dublin
0.66
Beijing
0.7
Tokyo
1.6
0.5
1.0
5%
Munich
12%
Dublin
13%
Milan
7%
Kuala Lumpur
25%
Cape Town
25%
Rome
11%
Hong Kong
7%
Sydney
Ile-De-France
Tokyo
London
15%
6%
7%
14%
Johannesburg
25%
Dubai
125%
18%
Beijing
1m
2m
3m
22 23
Overseas
buyers in
the London
market
Overseas buyers have
always played a significant
role in the London real
estate market. Not only is
there an immense depth
of demand for residential
property in London, there is
also considerable breadth;
our recent schemes have
attracted buyers from
over 25 different nations.
This partly reflects the
cosmopolitan nature
of London itself, but
increasingly, it highlights
the compelling investment
case of its real estate.
37%
Of Londoners born overseas
London must be viewed within its global
context. London is a truly international city,
attracting people from all over the world
to its unbeatable business, cultural and
educational environment. As a result 37%
of London residents were born overseas.
It is inevitable that the cosmopolitan nature
of Londons population is replicated in
its housing market, with a huge range of
nationalities owning property in London.
However, it is misleading to classify
non-British buyers as overseas buyers if
they live and work in London, and have
done for some years.
15%
Overseas buyers
Why London?
Cultural offering
Currency play
Education
Financial centre
1%
2%
Oceania Americas
3%
Africa
5%
Middle
East
10%
Russia
11%
Asia
14%
Europe
54%
United Kingdom
24 25
Overseas
buyers in the
global market
Overseas buyers are not
exclusively a London
phenomenon. The global
elite have an interest in a
wide range of locations and
types of assets. In addition,
more modest Asian
investors are attracted to
emerging locations within
global cities that provide
good investment potential.
This is globalisation and
integration of the financial
markets at work.
80%
Of Chinese HNWs would like to send
their children to study overseas
For second home buyers, the Cote
DAzur, London and Miami, remain
popular and account for 90%, 48% and
45% of prime buyers respectively.
One of the increasingly significant buyer
groups is the Chinese. These buyers
typically favour urban locations, with well
known universities, a strong economic
backdrop and world-class lifestyle such
as New York, San Francisco, Vancouver
and Sydney. Motivations include quality
of life and childrens education.
28%
New York
35%
Los Angeles
35%
London
37%
In tandem with overseas investors
1
looking to buy in London, British buyers
Sydney
40%
United States
are also active overseas. Popular ex-pat
7,135
destinations are the obvious targets,
Dubai
90%
such as Hong Kong and Dubai, as well
as the numerous oil industry pockets
2
1
all over the world. Indeed, the Emirates
China
United
States
real estate markets has one of the most
2,378
7,135
diverse buyer profiles, with 133 separate
nationalities investing in the sector in
1.
H1 2014, spending close to AED 37.5
3
2
billion (6.31 billlion) altogether. The
1
Japan
China
British formed a considerable part of United States
1,240
2,378
this spend, at around AED 5.811 (0.977,135
Net gain in millionaires
over
the
last
decade
1.
billion) recorded, though this is likely to
be much higher.
4
3
2
Hong Kong 22,200
1
United States
Growth areas
China
2,378 Sydney
7,135
1.
1.
In terms of new markets, there is
New York
potential for a considerable surge in
2
values in
parts of the world that are 3
Japan Singapore
undergoingChina
substantial infrastructure
1,240
2,378
improvements. Rio is an obvious
London
1. natural
example; already rich in
resources, with a growing high net worth
3
4
population,Japan
its massive infrastructure
United Kingdom
improvements
related to the World Cup513
1,240
and Olympics will only act as a further
catalyst to improve the offer in the city.
4
United Kingdom
513
Number of millionaire
5
1
Switzerland
United States
435
7,135
households,
000s,
United Kingdom
513
Japan
1,240
22,200
42,000
United Kingdom
45,00
513
5
1
6
2
2014
Switzerland
United
States
435
7,135
5
1
6
2
7
3
Germany
China
388
2,378
2
China
2,378
3
Japan
1,240
4
United Kingdom
513
5
1
6
2
Switzerland
435
United States
7,135
114,100
7
3
Germany
China
388
2,378
United States
7,135
Switzerland
United
States
435
7,135
Germany
China
388
2,378
Canada
Japan
384
1,240
1.
Canada
Japan
384
1,240
8
4
Taiwan
United
Kingdom
329
513
1.
5
1
Switzerland
United States
435
7,135
6
2
7
3
Germany
China
388
2,378
Canada
Japan
384
1,240
8
4
Taiwan
United
Kingdom
329
513
9
5
Italy
Switzerland
281
435
1.
7
3
6
2
Germany
China
388
2,378
Canada
Japan
384
1,240
8
4
Taiwan
United
Kingdom
329
513
9
5
Italy
Switzerland
281
435
10
6 France
Germany
274
388
1.
7
3
Canada
Japan
384
1,240
8
4
Taiwan Kingdom
United
329
513
9
5
Italy
Switzerland
281
435
10
6 France
7
Canada
384
274
Germany
388
1.
4
8
5
9
Taiwan
United Kingdom
329
513
Switzerland
Italy
5
9
10
6
Italy
Switzerland
281
435
France
Germany
10
6
France
Germany
274
388
7
Canada
7
Canada
384
Taiwan
Taiwan
329
26 27
A comparison
of property
taxation
In comparison with many
other countries, the UK
property tax regime is
relatively modest. However,
the inflow of overseas
buyers into Prime Central
London, and the subsequent
surge in values, has led
to substantial political
pressure to change this.
Additional taxes on
overseas buyers have been
introduced, namely a
higher Stamp Duty and a
Capital Gains Tax, while a
further Mansion Tax is also
being mooted.
Stamp Duty
Transfer Tax
CGT
Annual Tax
London
Hong Kong
New York
Singapore
Kuala Lumpur
Dubai
Dublin
Johannesburg
Tokyo
Sydney
Paris
Berlin
Rome
Beijing
Hong Kong
London
New York
Cost to buy
Cost to occupy
Cost to buy
Cost to occupy
Cost to buy
Cost to occupy
140,000
1,854
170,000
2,485
56,500
22,992
Singapore
Dubai
Dublin
Cost to buy
Cost to occupy
Cost to buy
Cost to occupy
Cost to buy
Cost to occupy
60,000
1,905
80,000
no charge
40,000
4,300
28 29
Australia
China
Capital gain
Annual tax
40,490
30,050
4% (Transaction fee).
Country
Italy
Japan
United
Kingdom
40,000
Dubai
France
-- 25%
50,000
Germany
15,000
7,150
Malaysia
Capital gain
Annual tax
-- 3% on cadastral value
-- 7% if luxury residential
Plus Cadastral tax of EUR 168
(if first home), or 1% of price if
additional homes.
70,000
33,000
-- Up to 125,000 0%
-- 125,001 250,000 1%
-- 250,001 500,000 3%
-- 500,001 1 million 4%
-- 1,000,000 2 million 5%
-- Over 2 million 7%
If bought by a non-natural person
15% for over 500,000.
40,000
-- First RM 100,000 1%
-- Next RM 400,000 2%
-- Above RM 500,000 3%.
-- Ownership up to 5 yrs
30%
-- Less than 5 yrs 0%.
30,000
20,000
34,500
-- 2%
Hong
Kong
Ireland
-- Up to EUR 1 million 1%
-- Over EUR 1 million 2%.
Singapore
-- First SG$180,000 1%
-- Next SG$180,000 2%
-- Over SG$360,000 3%
Plus 15% for foreigners.
None.
-- 33%
Netherlands
South Africa
10,000
Thailand
-- 13.3%
75,400
10,000
30 31
Global
influences
on design
Buyers exposed to
international trends are
expecting ever more from
their homes. The residential
industry, increasingly with
international capital and
experience, are responding
to these demands. This
globalisation is having a
direct influence on the end
product. In London this
has led to marked
improvement in the
underlying amenity offer.
Lifestyle living
Globilisation greatly
influences society and
lifestyle through the
international sharing of
views, products, ideas, and
culture. As individuals and
their lifestyles have evolved,
it is natural that our homes
have too.
In addition, Canadian developers have
capitalised on the unrelenting Chinese
appetite for some time, being feng shuiaware on every new-build and having
experts on-hand to advise in this regard,
as well as omitting unlucky numbers from
doors and floors. However, there is also
an array of more specialised products
now on the market; for example, Olive
on Vancouvers Cambie Street was
designed for people who love to cook
and entertain, so sacrificed bedrooms for
amazing kitchens, and made the most of
the Wholefoods at ground floor to aid the
marketing campaign. Elsewhere, Festival
Tower in Toronto and Brava in Vancouver
were both designed to incorporate the
respective Film Festival HQs in the
ground floor, providing residents access
directly to the festivals but also the ability
to use the cinemas as private screening
rooms for the rest of the year.
32 33
City snapshot
In this section we provide an
overview of key themes in a
selection of global markets.
New York
Lower Manhattan, a market that used to
be dominated by office buildings, has
now adapted to be a live, work, play
environment. The area bounded by
Chambers Street to the southern tip of
Manhattan, and East River to Broadway
constitutes Lower Manhattan. As of
the first quarter of 2014, approximately
61,000 residents lived in lower Manhattan
in 30,500 units. There are now 323 mixeduse and residential buildings, with 2,288
units in nine buildings under construction.
These numbers are expected to rise
consistently as downtown becomes a
viable residential option for workers and a
growing student population.
11m
Population
The projected growth for lower Manhattan
residents is 63,000 residents in 31,500
units by the end of 2014 and 64,000 in
32,000 units in 2015. The luxury rental
market has taken root downtown. Lower
Manhattan ended the first quarter of
2014 with rent above the Manhattanwide average with median rental rates
at 2,040 per month and 33 per
RSF. Lower Manhattans vacancy rate
dropped to 1.54% during this same
period. Residential rental conversions
have grown in the past decade in the
downtown Manhattan market. This
trend is largely attributed to the NYC
government program, 421-g. This
program provides tax exemption and
abatement for conversion of commercial
buildings to multiple dwellings. It was
implemented in fall of 1995 and expired
in 2006. However, many residential
developments are still benefitting from
the programs incentives. Eligible projects
include conversions in most of the areas
in Manhattan south of Murray Street, City
Hall, and the Brooklyn Bridge.
230,000
Average property price
The revitalisation of downtown makes
the area more appealing for residents.
New office space additions with the
completion of World Trade Center
buildings have drawn business and retail
to lower Manhattan. The 800,000 sq ft
World Trade Center Transportation Hub
houses the PATH station and 350,000
sq ft retail complex. The redevelopment
of the South Street Seaport (Pier 17) will
add another 365,000 sq ft of retail, dining,
and entertainment space in 2016. The
city has also invested 25 million in a
capital reconstruction project to develop
the infrastructure of Broadway. There is a
new appeal for families in the downtown
market. Imagination Playground, an
innovative space designed by David
Rockwell designed to improve learning
through fun, caters to this growing
demographic.
34 35
Hong Kong
The residential sector in Hong Kong
remains very much under the influence
of market cooling measures. This has
stripped out many would-be speculative
buyers, and also acted as a mild
deterrent for overseas buyers, thus the
mass market is now mostly led by local
buyers who are upgrading.
The second-hand market consists almost
exclusively of Hong Kong permanent
residents who intend to live in the
property themselves. A large proportion
has been first time buyers, reflecting the
governments favourable stamp duty tax
amendments for this group. With lending
rates still incredibly low, buying currently
makes more financial sense for many
residents than renting.
Various stamp duty measures introduced
last year have been aimed at dissuading
overseas buyers from the market.
Although this has generally worked
well, many developers are now offering
generous discounts on the new-build,
particularly in the prime market, which
has helped stir recovery in the market,
especially in terms of demand from
the mainland. Strong rental returns for
some of the primary units now make
them viable investment opportunities
again. In order to continue to cool the
market, particularly amongst overseas
buyers, most commentators think that
the government will have to roll out more
serious tightening measures.
7.2m
Population
Private housing supply for 2014 is
projected to increase by around 17%
year-on-year, which equates to an
additional 2,270 units, compared with
2013 estimates. This would bring total
housing supply for the year to 15,820,
which is still well below the governments
target of 20,000 new units per year.
The additional supply may have limited
impact on overall mass market prices this
year, though its geographic concentration
is likely to have a noticeable impact at
a sub-market level. The New Territories
are the main focus, in particular Yuen
Long, Tsuen and Shatin, which combined
will assume 40% of all new supply. We
could see this reflected in slight price
movements in these specific areas.
835,000
Average property price
The overall rental market in Hong Kong
remains underpinned by strong occupier
demand. This was particularly the case,
following the cooling measures in the forsale market. Some would-be purchasers
adopted a wait-and-see mode and opted
to rent while they did so, at least until
effective residential values matched
expectations. Rental growth in the mass
market is surpassing that in the luxury
market that consists of much larger
properties. The latter, which is mostly
driven by ex-pat demand, was relatively
subdued over the last quarter, reflecting
little net-change in expat hiring. This
frozen demand has frozen rents over the
last few years.
36 37
Bangkok
Since December 2013, the overall
Bangkok condominium market has
been affected by the prolonged political
turmoil. There has been a slowdown in
sales, new launches and re-sales in all
areas in the first half of 2014.
However, following the coup on 22
May 2014, there have been signs of
recovery in the downtown condominium
market with the successful launch of
the Magnolias Riverfront Residence
project, where more than 150 of 379
units have been booked at a price over
THB 200,000 per square metre, even
before the presales event. This proves
that sentiment in the luxury condominium
market has begun to rebound after a sixmonth slowdown.
10.5m
Population
120,000
Average property price
Resale units from speculators and
existing unsold inventory from developers
in the midtown/suburban market will
restrict the possibility of prices rising in
the midtown and suburban areas. By
contrast, the dynamics in the downtown
market have been very different because
of limited new supply.
About 80% of the buyers of luxury
downtown properties are Thai, whereas
the midtown and suburban markets are
almost 100% driven by Thai buyers.
The dominance of domestic purchasers
means that the Bangkok market is very
resilient and although the market may
experience a slowdown during periods
of political unrest, prices have not fallen.
In fact, prices have continued to rise for
the most popular properties. Prices for
new projects and resale prices for the
best condominiums in the best downtown
locations are expected to continue to rise.
8.1m
Population
The market is now in recovery mode.
The downward trend in residential
prices has slowed down and sales have
picked up strongly.
71,000
Average property price
38 39
Sydney
The Sydney residential market is
undergoing a prolonged period of
strength, with many parallels to other
key global cities, such as London and
New York. At a macro level, the wider
Australian economy has proven resilient,
interest rates remain low, and the political
landscape is typically benign. The world
class English-speaking education system
also adds to the appeal, which altogether
continue to attract overseas investors,
particularly from China. At the same time,
domestic demand is being driven by
huge population growth. The population
of Sydney is expected to continue to
grow at 1.7% per year up to 2029, or
25% in total over this period. This is 0.2%
per year above previous historic levels,
putting further pressure on housing.
4.8m
Population
Mounting demand for housing is set
against a backdrop of limited supply.
Although there are over 26,600
apartments currently under construction
across the city, this is set against a
considerable back-log. The city is notably
restricted by land availability through
geographical limitations, zoning, planning
restrictions and suitable infrastructure.
These are all barriers to increasing the
delivery of residential supply. However,
as the market gathers pace, interest from
Asian developers such as of Greenland
and SP Setia are helping to increase the
amount of units delivered to the market.
301,000
Average property price
Significant increases in capital values,
following rapid improvements in buyer
demand, has made entry into the
residential market very difficult for first
time home owners. Just 7.8% of all
owner occupier purchasers are made to
first home buyers, considered against
the added encouragement from the
Governments First Home Owner Grant
Scheme. Affordability remains the biggest
issue for first time buyers with high pricing
continuing to lock out new entrants.
40 41
Amsterdam
The Dutch residential market is undergoing
considerable structural and regulatory
change. Traditionally, government
policies have focussed on stimulating
home ownership and facilitating housing
corporations in the social housing sector.
As a result, the private rented sector has
been marginalised, unregulated and
difficult for commercial investors to access.
However, this is now changing. The global
economic crisis, austerity measures and
the increasing demand for private rented
accommodation has encouraged a shift in
policy to boost this segment of the market.
1.25m
Population
Amsterdam is considered the fifth most
important economic region in Europe.
Consequently it is listed amongst the
most attractive cities for business activity
in Europe and almost 2,500 foreign
companies are located in Amsterdam.
In addition, due to its cultural amenities,
favourable living environment and
relatively high standard of living,
Amsterdam has attracted a young and
lively population. Therefore, there is
increasing demand from relatively young
and well educated people for private
rented accommodation. However,
although construction volumes in the
capital are increasing overall, and most
of this is being delivered for private
accommodation, there still remains a
substantial shortage.
185,000
Average property price
Overseas buyers are a new phenomenon
in the Amsterdam residential markets.
Until recently, the market was the exclusive
playing field of Dutch institutional investors
and a group of large private property
companies and family offices. Generally,
the institutional funds have been targeting
new developments and portfolios in the
core regions, whereas the private property
companies often took up the disposition of
the institutes, creating value by selling off
vacant individual units to owner-occupiers.
The recent widening of the commercial
segment has created liquidity and
openings for foreign buyers. Recently,
investors have acquired large residential
portfolios. The most striking transaction
and largest residential deal to date, was
the purchase of a 5,500 unit portfolio from
a distressed housing corporation.
42 43
Munich
Berlin
Hamburg
3.4m
229,000
Population
1.4m
Population
The population of Germany has been
in marginal decline. However, there is a
wide regional disparity, with rural areas
loosing populations and key cities are
undergoing substantial growth. Munich
is one of the strongest growing cities,
with a 12% increase in its population in
the last decade.
325,000
Average property price
Reflecting its increasing population, there
is extremely high demand for residential
property in Munich. Despite many
residential new developments throughout
the city, demand is not being satisfied by
the residential supply. The city has set
housing targets of 7,000 units per year,
and has tried to zone large development
areas to try and help stimulate activity.
However, construction levels are still
below where they need to be. As a result,
rents and prices in Munich are among
the highest anywhere in Germany, and
residential investments in Munich are often
considered crisis-resistant as a result.
174,000
Average property price
Until August 2006, there was a uniform
3.5% rate of Grunderwerbsteuer (land
transfer tax). Since September 2006,
the federal states have been able to
determine their own tax rates. Following
the change in the law, the state of Berlin
was the first to raise its tax rate to 4.5% in
2007. It further increased the tax in 2014
to 6% among the highest tax rate in
Germany. Agents costs are also among
the highest at up to 6% net.
1.7m
Population
44 45
A comparison
of the private
rental sector
The private rented sector
has been one of the most
talked about parts of the UK
property market in recent
years. Its rapid growth is
opening up huge investment
opportunities for the
development and ownership
of professionally-run,
service-driven rental blocks.
17%
Of households rent privately
in England
The opportunity
Investor demand for residential income
stock lies behind the core nature of the
income stream; it correlates very strongly
with RPI, wage price inflation and pension
fund liabilities. It is also relatively low in
volatility, and instead highly sustainable
through the peaks and troughs of the
economic and property cycles.
Most funds now seem to be looking
seriously at a way into this new market.
There is every likelihood that prevailing
investment yields will compress, premium
rental pricing could be sustainable, and
additional income could be received
for services offered to rental customers.
These factors could drive up the value
of newly built and let assets quite
considerably, albeit at present, and quite
sensibly, they are not taking into account
the current underwriting of joint ventures
and fundings. These factors, together
with the nature of this income, are now
driving a 20 billion plus wall of capital
towards the UK resi-investment market.
24%
Of households rent
privately in London
The opportunity to deploy major capital
into the residential investment market
over the last few decades has only really
materialised in the last 3 or 4 years. This
is due to the change in balance sheets of
house builders and property companies,
banking arrangements and the
international drive for core and annuity
style income streams. The main source of
capital is currently coming from the US,
Canada, mainland Europe and the Middle
East. However, the domestic funds are
also catching up fast.
The main hurdle in the market is the
lack of stock. Large apartment blocks
work best, given the potential for greater
efficiencies and the economies of scale.
However, there are few to none unbroken
blocks available to purchase. Hence
the real opportunity lies in funding and
developing this kind of stock.
46 47
48 49
Global
comparisons
at a glance
As the UK market is
evolving we look for
inspiration from overseas,
where this market tends
to be much more mature
and well established as an
asset class.
Type of stock
Security of tenure
Rent controls
Tax regimes
Investor profile
Austria
Denmark
Netherlands
Australia
Denmark
England
19
28
17
17
Norway
Spain
USA
10
14
39
32
16
76
2
32
Germany
61
82
3
65
Social rented (%)
63
75
Norway
78
US
78
58
21
44
60
England
65
47
Germany
Netherlands
53
Finland
Switzerland
70
Spain
86
Belgium
86
France
95
Ireland
95
Australia
95
50 51
London rides
the global
retail wave
In the period following
the global financial crisis,
luxury retailers embarked
on a wave of international
expansion. This largely
reflected a need by retailers
to diversify away from low
growth western economies
and to tap cross-border
opportunities. This retail
globalisation is being
accelerated by online
brand exposure and price
comparison.
160m
Shopper visits to the West End
But, London is the worlds single most
popular shopping attraction with a greater
range of international retailers than any
other city. It is the cosmopolitan nature
of Londons shopping population that
has propelled the city to number one in
the global retail rankings. If a retailer is
not in London they are not considered
truly global. London is also the primary
springboard for new non-European retail
entrants into Europe.
Londons growth resurgence has
coincided with the completion of two giant
cutting-edge shopping centre schemes
by Westfield. These two schemes
have proved magnets for international
retailers seeking top-quality purpose-built
shopping centre environments.
21%
Of these are overseas visitors
Crossrail will further boost new retail
entrant levels when it opens in 2018. This
new main-line railway service, crossing
from west to east has triggered a wave of
adjacent stock renewal in the West End.
Partly reflecting the additional connectivity
from Crossrail, West End shopper visits
are expected to increase by 20%, or 30
million people, by 2023. This will clearly
boost activity and in turn rents.
With the very high levels of international
representation in London comes intense
competition. Central London is already
one of the most highly rented markets
in the world. With little in the way of new
space in the pipeline the city looks set
to get a lot more expensive in the future,
driving a ripple out and stock renewal into
currently secondary shopping areas.
52 53
The
prestige and
premiums of
office towers
There is a strong correlation
between a citys ranking as
a global financial centre and
the number of office tower
schemes, with New York,
Hong Kong, Singapore and
Tokyo high up the list on
both counts. The anomaly in
this scenario is London.
18%
Rental premium for top floor
office building
These schemes mark a new phase in
Londons tower development, offering
more efficient floorplates, facilitated by
smaller cores. New towers have also
been designed to reduce occupational
densities, with 20 Fenchurch Street the
first tower scheme in Central London to
utilise a density of 1:8 compared with
the standard 1:10. Further innovations
to modern ways of working such as
intermittent atria at the Salesforce
Tower to increase natural light into the
deeper areas of a typical floor, and a
concierge style menu of service options
have been more commonplace. Whilst
towers in London had been obligated
as part of planning consents to include
public space at the top or bottom of the
building, these amenities have largely
turned out to be of substantial value
to prospective occupiers. The best
examples have been at the Salesforce
Tower and 20 Fenchurch Street.
54 55
Contacts
Jennet Siebrits
Head of Residential Research
Senior Director
+44 20 7182 2066
jennet.siebrits@cbre.com
Helen Gray
Residential Research
Associate Director
+44 20 7182 2068
helen.gray@cbre.com
Nick Axford
Global Head of Research
Executive Director
+44 20 7182 2876
nick.axford@cbre.com
Lisa Hollands
London Residential
Managing Director
+44 20 7420 2004
lisa.hollands@cbre.com
Mark Collins
London Residential
Chairman
+44 20 7182 2264
mark.collins2@cbre.com
Chris Lacey
London Residential
Executive Director
+44 20 7182 2318
chris.lacey@cbre.com
Sources
ABSA, AECOM 2013 Handbook, Australian Bureau of Statistics, Bank Of Japan, CSO,
CSO census 2011, Census, Central Statistic Department Hong Kong Government.
DAFT, Experian Business Strategy, Federal Institute for Research on Building, Federal
reserve Bank of Dallas, Federal Statistical Office of Germany, Japans Bureau of
Statistics, KEN Residential Market Report, Knight Frank, Lightstone, London First,
Molior, Nationwide Building Society, National Institute of Population and Social
Security Research, Numbeo.com, ONS, Oxford Economics, Reins, SA stats, SA
reserve Bank, Urban Affairs and Spatial Development, US Bureau of the Census, 2012
American Community Survey, BCG Global Wealth Market-Sizing Database, 2014.
Exchange rate
1: $1.69