Stepping into the property market of the new world order

WITH debt and financial turmoil gripping the economies of Europe, North America and Japan, it’s not hard to look at the rise of India, China and Singapore and sense a coming shift in global power. Recent headlines have been staggering: last year, David Cameron led the largest British trade delegation to India in living memory, this year, China became the world’s second largest economy and next year research shows that Singapore will create the most financial sector jobs in the world.

The property market has proved no exception to this trend. This week’s Savills research shows that property price growth has left Japan and the West lagging behind (see graph right).

The gap is clear. Properties in the “old world” cities of Tokyo, London, Paris, Sydney and New York have grown a mere 32 per cent since 2005, while the “new world” cities of Shanghai, Singapore, Hong Kong and Mumbai have grown, on average, by 123 per cent over the same period.

“It has become apparent that the debt-induced crisis of 2008 was suffered most by the ‘old world’ cities and not the ‘new world’ ones,” says Yolande Barnes, head of Savills’ residential research. “The biggest ‘old world’ value rebounds have been experienced in the cities most open to ‘new world’ investment, notably London and Paris.”

The shift has occurred since 2005, according to Savills. Hong Kong is the most expensive – 63 per cent more expensive than London in second place. These findings left us curious about how we too could be part of the shift East. Here we look at what Asia’s finest cities have to offer.

HONG KONG

Capital value: Hong Kong has the world’s most expensive properties, according to Savills. Since 2005, its property prices have grown 98 per cent in value.

Rent yield growth: 28 per cent growth since December 2005.

Advantages: Hong Kong has low tax rates and no capital gains tax. Its established financial framework makes it easy to do business in. Its credentials as a modern and international hub make readjusting to life in this Asian city far easier than living in mainland China or India.

Disadvantages: The cost of living is high. Hong Kong was ranked the fifth most expensive place to live in the world by Mercer in 2009. With mainland China’s heavy manufacturing plants just north of the boarder, pollution is also a problem.

Market comment: Simon Smith, head of Savills research in Asia Pacific, says: “Hong Kong has emerged as the hub of the Asian financial market and the gateway to mainland China. This elite status has prompted increased capital and talent inflow over the past decade.”

Most desirable areas: On Hong Kong Island, The Peak and Southside are the most popular areas to live among affluent expatriate families. The Mid-Levels area is well-liked by financial types because it is close to the main business district on the island as well as to entertainment areas Lan Kwai Fong and Soho. West Kowloon, just across the harbour from Central on the island, is up-and-coming because a number of multi-national investment banks have relocated to the nearby and newly-erected International Commerce Centre.

MUMBAI

Capital value: Mumbai has the world’s tenth most expensive properties, according to Savills. Since 2005, its property prices have grown 154 per cent in value.

Rent yield growth: 69 per cent growth since December 2005.

Advantages: This huge bustling city has a vibrant culture. And unlike China, English speakers have access to it all. Labour costs are low, so employing domestic help and a driver are achievable for those on ex-pat salaries. The American School, German School and Ecole Francaise based in Mumbai are world-class. Top notch private medical care is available and affordable for those on an ex-pat wage.

Disadvantages: Mumbai is a heavily populated city with an enormous income disparity between the rich and poor. This means that begging and pickpocketing are rife. There is heavy traffic and pollution. Overcrowded and often unreliable public transport means getting around can be time consuming. Imported goods like wine are expensive. Until recently, it was difficult to pay bills by post or online. Many people still pay them in person.

Market comment: Barnes warns: “There is a widespread sense that the extraordinary house price growth seen in recent years, despite the 2008 downward correction, is unsustainable. Mumbai has seen spectacular growth in rents, up 69 per cent over five years, but yields are still high in relation to other investment rates, despite the rampant capital growth. This continues to make it an attractive option for investors who have bought large quantities of new build apartments with alacrity.”

SHANGHAI

Capital value: Shanghai has the world’s sixth most expensive properties, according to Savills. Since 2005, its property prices have grown 143 per cent in value.

Rent yield growth: 6 per cent growth since December 2005.

Advantages: Shanghai has a 24-hour lifestyle similar to cities like New York. Expats can enjoy world-class dining in the restaurants on the Bund, fancy cocktails on the roof top bars overlooking the Huangpu River (pictured above) and shopping on high-end boulevard streets like Nanjing Road. It is easy to get around the city. It has one of the largest metro systems in the world – one that’s total track length is expected to double by 2020. Labour costs are cheap compared to Western countries. This makes paying for services and local food cheap.

Disadvantages: There are 23m people in Shanghai and compared to London and Beijing it is a small place (the buildings go up rather than spread out). This means it is always crowded. Red tape is endemic and the tax rates are not as attractive as those in Singapore or Hong Kong. Those earning more than 100,000RMB (£9,645) a year are taxed at 45 per cent. Bills and rent are paid in cash, in person. This can be very time consuming.

Foreign ownership restrictions: Expats must have lived in China for over a year if they want to buy a property. They are also restricted to buying just one property for their own use.

Most desirable areas: The most sought after areas are Xintiandi, an affluent car-free area with plenty of high-end restaurants, bars and shops, the tree-lined streets of the historical French Concession and Jinqiao, an area conveniently located close to the Pudong area that houses most of the city’s multi-national businesses.

SINGAPORE

Capital value: Singapore has the world’s fourth most expensive properties, according to Savills. Since 2005, its property prices have grown 123 per cent in value.

Rent yield growth: 95 per cent growth since December 2005.

Advantages: Singapore is welcoming to expats. It has a very multi-cultural society since 25 per cent of the population are foreign. The city is modern and its population is educated. This makes it easy for expats to adjust to. The taxes are low, the food and public transport are cheap and it has the fourth lowest crime rate in the world. The main shopping areas are just 4km walk from the popular expat enclaves and the city’s island status means that many residents take part in water sports.

Disadvantages: The city is a financial safe haven, making the Singapore dollar a very strong currency. If you have income denominated in another currency, you may find your spending power eroded. The weather is hot and muggy all year round, ranging from 23 to 33 degrees celsius. Humidity hangs above 90 per cent. This can sap the energy of those unacclimated. It is ranked as the third most densely populated city in the world with 7,148 people per sq km, making it very crowded.

Most desirable areas: Orchard Road, Holland Road, Bukit Road and the East coast are extremely popular with expats since they are close to the main shopping areas. Those looking for more space for their money can avoid these area’s high prices by buying on the West coast.