World #1: London named best city for luxury property buyers

Inaugural Alpha Cities Index launched to help UHNWIs decide on where to buy right now, and in the future...

On balance, London is currently the most desirable city in the world for top-end homebuyers, according to a major new study by WealthX.

The inaugural Alpha Cities Index – drawn up in partnership with Warburg Realty and Barnes International Realty – has ranked 50 international centres from a UHNWI’s point of view, taking into account things like culture, education, ease of doing business, connectivity, property tax, and green creds.

A location must meet the all-important “trifecta” of demands – practical, emotional, and financial – to appeal to a buyer with $30m or more in the bank, says the research team, and the UK capital ranks in the top four places in more than half of the 11 key indicators, namely: cultural richness, luxury shopping, education, connectivity, financial safe haven, ease of doing business, and the number of ultra-wealthy individuals living there. It also scores highly for personal safety and green credentials but recent SDLT reforms have cost the city points on the property tax regime measure.

Described as “an all-rounder, with strong safe haven appeal”, London is joined in the top three by New York and Tokyo, with the trio placed some way ahead of other challengers including Sydney and Paris.

NYC scores highly for the number of high-quality educational institutions, a strong cultural base, excellent air travel links, an extensive range of luxury shopping, a highly developed financial services sector, and its high population of ultra-wealthy residents – the largest of any city in the world. As in London, value for money is an issue, but the Big Apple underperforms on personal safety and green footprint.

Meanwhile, Tokyo is adjudged the best place in the world for luxury shopping and ranks highly for its cultural attractions, high population of wealthy individuals (the largest in Asia), personal safety, and status as an established financial safe haven, but drops points on property value-for-money, ease of doing business and environmental credentials.

Frederick Warburg Peters, CEO of Warburg Realty: “This report is the first-ever attempt at putting the global real estate market into perspective. Using the resources of three companies, we’ve taken a deep dive into where the world’s highest earners are living, playing and investing – and explored the practical, emotional and financial factors involved in their buying decisions.”

Clelia Warburg Peters, President of Warburg Realty: “As a share of total net worth, real estate holdings tend to fall as you increase your personal wealth. So someone with a net worth of $10 million might own a $5 million apartment, but if you have a net worth of $100 million, you’re less likely to own $50 million worth of real estate. I think there was a misunderstanding of the depth of the market on the part of many developers.”

Here’s the full rankings…

Usefully, some of the top emerging destinations for wealthy real estate buyers are also picked out, with Cuba and Lisbon looking like the smart bets. Here’s the choices and rationale…

CUBA

Ongoing reconciliation with the US marks a new era for the Caribbean island, with the gradual liberalization of the economy offering considerable real estate investment potential. Investors from around the world are eyeing opportunities in new property development and renovation of hotels, pent- houses, and private villas, ahead of a likely end to sanctions in the next few years, which will trigger a surge in US investment.

LISBON, PORTUGAL

One of the oldest cities in the world, Lisbon is fast becoming a popular location for luxury property buyers. A range of tax incentives, including the ‘Golden Visa’ program for non-EU citizens, and affordable high-end housing offer a tempting mix alongside its rich culture, temperate climate, and relatively low cost of living.

BERLIN, GERMANY

The capital of the eurozone’s strongest economy, Berlin is a creative hub of artists and entrepreneurs, with a dynamic nightlife and numerous parks. A city on the up, its property market is rebounding vigorously, but luxury real estate remains relatively affordable, following a long period of subdued capital value growth.

TAOS, US

Resting at the foothills of the Sangre de Cristo mountain range at an elevation of over 6,500 feet, Taos is located 70 miles north of Santa Fe and 40 miles south of the Colorado border. A winter playground offering world-class skiing and a year-round getaway for artists and personalities alike, Taos and Taos Ski Valley still retain their small-town feel and a sense of exclusivity.

TEL AVIV, ISRAEL

Israel has been booming in recent years. The country’s financial center and core is Tel Aviv, an economic capital home to embassies, businesses, and high-tech schools, as well as Israel’s largest university and many luxury buildings. Florentine, the most rapidly developing neighbourhood, appeals to many investors and young buyers. Luxury property prices have been rising strongly, but taxes and transaction costs are modest.

CAPE TOWN, SOUTH AFRICA

Cape Town has not historically been high on the radar of luxury property buyers, but the city offers a heady mix of natural beauty, trendy bar culture, and value-for-money. A er a lean period, the real estate market is recovering strongly, led by the affluent suburbs of Camps Bay, Clifton, and Fresnaye with views of the Atlantic Seaboard. The ultra- wealthy population residing there is modest, but is swelled by Europeans during the winter months in the northern hemisphere.

AUCKLAND, NEW ZEALAND

New Zealand’s largest city has seen rapid property price rises in recent years, driven by increasing demand from foreign buyers, particularly from China. A resilient economy, low crime rate, well regarded schools, and a vibrant cultural scene offer an enticing mix, with waterfront views of the harbour especially popular for luxury buyers seeking a high-quality lifestyle.

The report also features an update to WealthX’s Global Luxury Residential Property Index, which tracks the top 10% of the resi property market (by median sales price) since 2010. The latest edition points to prices peaking in 2015 and falling during the first half of 2016. “As a result”, adds the team, “only the properties with an optimal combination of practical, emotional, and financial benefits have continued to grow in value”…

Here’s a few of the other useful findings:

  • Half of the world’s UHNWIs own two or more homes; around 10% own 5 or more
  • The total number of UHNWIs in 2015: 212,615
  • The number of ultra-wealthy individuals is expected to exceed 318,000 by 2020
  • The combined total wealth (in $US) of UHNWIs expected by 2020: 46.2TRN

Download your copy of the report here (registration required)