London has the most expensive luxury market.
The rising boom of urban living is leading to heightened demand for prime residential properties in key global cities, according to a recent luxury residential property study from CBRE called Global Living Survey: Global Cities Compared, which compares the world's key global cities preferred by high net worth individuals.
According to the survey, London currently has the highest average prime residential new-build costs, at $3,380 per sq. ft., followed by Hong Kong and New York, with average prices of $3,290 and $3,040, respectively. qatarsales
Hong Kong and London alternate between first and second position in the residential rankings depending on market conditions. However, after the implementation of sales taxes in Hong Kong last year, transactions dropped to a 17-year low, resulting in a 5-10% drop in prime property prices over the year.
Despite this, there are indications that the Hong Kong market might be improving. Prices have risen in the mainstream markets, according to Marcos Chan, Head of Research for CBRE Hong Kong, Macau, and Taiwan, reflecting strong pent-up demand buoyed by speculation of further easing from the government, including favorable stamp duty tax for first-time buyers and low lending rates. Mr. Chan said, "Improved optimism related to recent capital market activity has also boosted the market."
"Market cooling policies continue to have a significant impact on Hong Kong's residential sector. As a result, many would-be speculative buyers have been weeded out, as has a mild barrier for foreign buyers, and the mass market is now dominated by local buyers upgrading "Mr. Chan continues.
With the rise in urbanization and the resulting rapid population growth—Beijing and Kuala Lumpur's populations grew by 18% and 25%, respectively—there has been an increase in property demand. Although Tokyo and Beijing were able to build enough housing to meet demand, construction rates also fall short of population growth.
In Bangkok, the overall condominium market has been impacted by political turmoil since December 2013, and with over 100,000 condominium units completed in 2014 and 2015, this is a critical test for the midtown and suburban market at a time when demand is low.
According to estimates, about 300,000 people in Vietnam are looking to buy property in Ho Chi Minh City; however, supply is concentrated at the high end of the market, while demand in the mass market outstrips supply. On the other hand, there are about 17,000 unsold condominiums.
Meanwhile, massive population growth in Sydney is driving domestic demand—the city's population is projected to rise at 1.7 percent per year until 2029, or by 25 percent overall. This increases the demand on housing by 0.2 percent a year over previous historic levels. Despite the fact that over 26,600 apartments are currently under construction in the area, there is a significant backlog—the city is severely limited by land availability due to geographical constraints, zoning, planning restrictions, and adequate infrastructure.
Housing demand is especially low in Hong Kong, where one house is constructed for every four new residents in a population of 7.2 million.
In Hong Kong, supply and demand are out of control.
In Hong Kong, private housing supply is expected to rise by about 17% year on year in 2014, equating to an additional 2,270 units as compared to 2013 figures. This will raise the total housing supply for the year to 15,820 units, which is still far below the government's 20,000-unit annual goal.
Even though this additional supply is unlikely to have a significant effect on overall mass market prices this year, its geographic concentration is likely to have an impact at a sub-market level, with a focus on the New Territories—particularly Yuen Long, Tsuen Wan, and Sha Tin—which will account for 40% of all new supply. Slight price fluctuations can be expressed in these areas.
Although numerous stamp duty measures implemented last year were intended to discourage foreign buyers from entering the market, the global elite continue to be interested in Hong Kong. CBRE's Head of Residential Research, Jennet Siebrits, says, "Buyers from the United Kingdom are becoming more interested in international markets. Hong Kong and Dubai are two of the most popular destinations for wealthy expats."
The divergence between different segments of the Hong Kong industry, both in terms of sentiment and underlying dynamics, is expected to continue in the future, according to CBRE. Given the constraints on current stock and future availability, the luxury end of the market is likely to be relatively resilient, while activity levels in the primary market are expected to rise, indicating a pick-up in supply and the fact that developers are still offering discounts.