Property listed by Christie’s International Real Estate
There is much movement and discussion in the global luxury real estate market, as local governments try and curb excessive budget deficits, fight recession and control potential bubble risks in key metropolitan cities. Income and property taxes are on the rise in London, Paris, Hong Kong and Singapore, as currencies fluctuate and the wealthy become increasingly mobile to best preserve their fortunes.
London and New York are set to remain the top destinations for the world’s elite as the number of people worth more than $30 million swells 50% over the next decade, according to Knight Frank LLP’s Wealth Report (Bloomberg). The two cities will remain the favoured locations for the world’s richest people until 2023 even though the fastest wealth creation will be in Asia and Latin America.
Economic instability and political turmoil continue to drive foreign investment in markets traditionally considered ‘safe havens’ when it comes to luxury real estate, London remains the prime example. But increased government measures are driving such investment costs up at a significant rate, forcing uncertainty for the immediate future, and potential declines in the sales of luxury homes.
“ London and New York are set to remain the top destinations for the world’s elite ”
Luxury property prices in Dubai rose at the second fastest pace in 2012, registering a 20% increase according to Knight Frank’s 2013 Wealth Report. Jakarta (Indonesia) topped the list of 80 global cities surveyed with prices soaring by 38%.
“Dubai stands out with strong growth of 20 per cent in the price of luxury villas during 2012… the emirate rebounded in 2012 on the back of a resurgence in demand,” explained the report. “This was aided by lower prices and underpinned by its location as a strategic hub, able to attract wealth from the Middle East, North Africa, the Indian Subcontinent and Central Asia.”
“ Luxury property prices in Dubai rose by 20% in 2012 ”
The government of Hong Kong has doubled sales tax on property costing more than HK$2 million ($258,000) and targeted commercial real estate for the first time as bubble risks spread from apartments to parking spaces, shops and hotels.
Home prices in Hong Kong have doubled in the past four years, driven by an influx of Mainland Chinese buyers, lack of new supply and some of the lowest mortgage rates on record. Under the new tax regime, stamp duty will increase to 8.5% of the purchase price for all properties. The Hong Kong Monetary Authority has also tightened mortgage terms for commercial properties and parking spaces.
According to London-based property broker Savills Plc, Hong Kong is the world’s most expensive place to buy an apartment, where homes cost 13.5 times the gross median household income.
“ Hong Kong is the world’s most expensive place to buy an apartment ”
Central London luxury-home prices unexpectedly rose at the fastest pace in 10 months in February as the British pound’s depreciation helped attract international investors, Knight Frank explained to Bloomberg.
“The fall in the value of sterling has increased the appetite for prime central London homes among overseas buyers,” Knight Frank said in a statement. The pound has lost approximately 5.5% this year against a myriad of currencies, and around 18% over the past five years, as estimated by the Bank of England. As of March 1st 2013, the pound fell to less than $1.50 for the first time since July 2010.
London continues to be an attractive investment market for Italian buyers, sparked by concern over politically instability in their home country. Wealthy Indians are also looking to the UK capital, accounting for 5% of the total overseas investment that the London residential market received in 2011 and 2012.
“ The fall of the sterling has increased the appetite for London homes among overseas buyers ”
Paris home prices are set to end their upward streak as French President Francois Hollande cuts property subsidies and raises taxes, coupled with an ageing population and stricter mortgage rules. A mass exodus of France’s wealthy has also created a backlog of luxury property on the market.
Average prices in the French capital have risen 37% since 2009, but fell 2% in the fourth quarter of 2012 when compared to the previous three months. The number of sales slumped 21% in the same quarter from a year earlier.
In a bid to find an additional €5 billion euros in spending cuts to keep shrinking the budget deficit, the French President has raised the capital-gains tax on real estate as well as income and wealth levies last year. Requirements have also been tightened when it comes to tax reductions for buy-to-let investments and interest-free loans for first-time homebuyers.
“ Average prices in Paris have risen 37% since 2009, but fell 2% in the fourth quarter of 2012 ”
Residential prices in Singapore hit an all-time high in the fourth quarter of 2012, as an increase in the number of millionaires drove up demand. Millionaire households rose by 14% in 2011, according to a Boston Consulting study. The proportion of millionaire homes in the city of 5.3 million people was 17%, the highest in the world, followed by Qatar and Kuwait.
Singapore’s home sales plunged 65% to a 14-month low in February after the government introduced its seventh round of cooling measures to cool record home prices. Stamp duty has been increased to 5-7 percentage points, with permanent residents paying taxes when they buy their first home. The Singaporean government also plans to raise taxes for the top 1% of luxury homeowners, as well as tax on investment properties.
Singapore is Asia’s most-expensive housing market after Hong Kong, according to Knight Frank 2013 Wealth Report. Singapore ranks 6th globally, behind Monaco, Hong Kong, London, Geneva and Paris respectively. The government has been imposing measures to cool the property market since 2009.
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