Savills have forecast the performance of prime-city and second-home markets relative to their country and have looked at key demand variables (population growth, wealth and economic growth) alongside supply and price levels in order to see which countries are set to perform best.
Country investability, based on economic performance and growth prospects alongside growing population is behind Savills ranking of Singapore and the UK in 3rd and 4th place respectively.
China and Hong Kong occupy 11th and 12th places among the dozen countries in the Savills survey.
In these locations Savills see current pricing as cyclically high and offering poorer value for short to medium term investors. “These are still big and investible markets, but we’d expect to see rental growth and yield movement before they once again top our investability list,” says Yolande Barnes, Director of Savills World Research.
“It is vital that investors understand the long term demographic, economic and supply-side drivers of demand – and therefore sustainable value – when making investment decisions. These can be different at national and local level.
“When a growing population, growing affluence and limited housing or land supply converge, we would anticipate real house price growth. The absence of one or more of these variables can stall a housing market and the absence of two or more can send property values downward.”
The Savills ranking focuses on countries with cities and resort locations that have consistently attracted investor interest over recent years.
The way that variables such as recessionary cycles, inflation and fiscal regimes, the availability and cost of finance, land supply politics, policies and planning play out on the ground is extremely complex and results in a wide variety of market behaviours.
To illustrate this, Savills has examined the five-year price growth potential of popular investment locations within each ranked country. The strength of the USA as an investable destination becomes clear, with its wide range of attractive opportunities. San Francisco is projected to see the strongest mid-term growth, ahead of New York, Los Angeles and Miami.
Meanwhile, world class cities such as London, Singapore and Hong Kong look more fully valued and this is expected to restrict growth relative to other cities over the next 5 years. Meanwhile, Shanghai, while expecting population growth, has seen a long period of asset price inflation and needs a period of rental growth before investors are attracted back into the market.
Other cities are faced with longer-lived demographic issues. Geneva, for example, like Switzerland in general, will be constrained by declining populations as well as the strong Swiss franc making international activity less attractive.
In a separate residential market report from the Royal Institution of Chartered Surveyors (RICS) you see confirmation of a growing gulf between UK supply and demand which is driving residential property prices higher and RICS now predicts that house prices are set to rise by 6 per cent in 2015.
The RICS house price indicator reached a 15-month high in August 2015, with a net balance of 53 per cent more respondents reporting price increases and growth recorded across all parts of the UK.
RICS chief economist Simon Rubinsohn says:
“Given current market conditions, the latest data unsurprisingly shows house prices continuing to rise, and at an accelerating pace. As such, house price inflation has now quickened in each of the last seven months following a sustained period of easing towards the latter half of 2014.
“This trend looks like it will continue into next year, however uncomfortable that may be for those looking to enter the market; so many of our members are telling us that they are struggling to replace the stock they have sold.”
Article courtesy of LandlordZONE