Investor Report

We look at the world’s latest property markets analyses and rate the cities in which we’re currently focusing our research and investment resources.

property-barometer

 

BERLIN

Investing

  • Population influx and sound economic foundations
  • 400,000 new residents expected by 2030 (1)
  • Prices for apartments up 10.1% in 2015

Berlin’s economy has been booming in recent years. The city has also been establishing itself as the start-up capital of Germany, with one new startup set up every 20 hours. The population has grown by 175,000 in the past four years alone in response to the growing economy and the city has its lowest unemployment levels since reunification – 2015 also saw the creation of 3.1% more jobs. This has created plenty of demand for apartments, the construction of which is currently at 1.5 apartments/1000 population; much lower than Munich (3.7) and Frankfurt (4.5) (3), while there is a vacancy rate of just 1.5% (4). Shortages – there is a 40% apartment supply deficit (5) – have resulted in between 5.1% and 6.9% rental growth in the past three years, and a 6% increase is projected for 2016 (6).

(1) BBU CEO – Maren Kern (2) CBRE/Berlin-Hyp 2016 Research Report (3) CBRE (4) CBRE (5) Secretary of State for Construction and Housing (6) ZIA

BRISBANE

Investing

Affordability Ratio: 6.1

  • Greater affordability over Sydney and Melbourne
  • Economy valued at AUD136bn and forecast to reach AUD217bn by 2031
  • Prices up 1.1% March to May, and 7.1% year on year to May 2016 (1)

Australia’s third-largest city, Brisbane is one of the fastest growing mature cities in the world, with a population that is set to increase from 1.11 million residents in 2013 to 1.38 million by 2031, with significant growth predicted before 2021 (2). Plenty of investment and regeneration is taking place across Queensland’s capital, including infrastructure development, and employment is expected to increase to 1.5 million jobs in 2031, up from 1 million in 2012. Property prices have been on an upward trajectory too, with house values increasing 5.5% in the year to March 2016, up 1.8% in February alone (1).

(1) RP Data (2) Urbis

CHICAGO

Investing

Affordability Ratio: 3.6

  • Third-largest city in the US
  • Prices remains 17% below peak (1)
  • Offers some of the world’s highest average yields for a global city at 7.9%

With over 31 Fortune 500 companies headquartered in the city, Chicago has cemented its status as one of America’s most important financial hubs and leading technology industries capital. Chicago is the third-largest city in the US with a Gross Metropolitan Product of USD630 billion in 2015. It remains a top choice for investors seeking good value within the US as prices remain below their pre-recession peak, allowing plenty of room for capital growth. Average yields are as high as 7.9% which are some of the highest for a major US city.

(1) Case Shiller HPI

LONDON

Investing

Affordability Ratio: 8.5

  • Intrinsic residential undersupply
  • Low interest rates and FX advantage driving foreign investment in short to medium term
  • Average home price forecast to reach GBP1 million by 2020 (1)

Following June’s EU Referendum result, interest rates were cut from 0.5% to a record low of 0.25%, encouraging buyers onto the market. Coupled with a 4.5% quarter-on-quarter increase in mortgage approvals and a 19% increase over the course of the year to February (2), London’s severe housing under-supply issues continue to put pressure on prices, so much so that properties in London are now almost 60% more costly than they were prior to the 2008 financial crisis (3) and have experienced an annual price increase of 14.5% (4). In fact, London property sales are up 40% despite the victory for the Brexit campaign (5). Although buy-to-let investors face an additional 3% stamp duty (as of April 2016) – which did result in a price growth slowdown following March (6) – price growth is expected to resume in the quarters ahead and reach 28% by 2020 (2).

(1) Propertywire.com (2) CBRE (3) Office for National Statistics/Nationwide (4) Land Registry (5) The Week (6) Nationwide

MANCHESTER

Investing

Affordability Ratio: 4.6

  • Northern Powerhouse vision continues to drive positive market sentiment
  • Now the base for 90,000 students
  • Highest potential rental yields in UK at 6.8%

Manchester is currently the strongest UK market outside London with the greatest economic growth when compared to the rest of Northern England and projected growth of 2.6% per annum during the five years to 2020. With plenty of ongoing infrastructure investment, the city is led by the financial and business services sector whose output growth forecast for 2016 to 2020 is 3.1% per annum. As such, employment is forecast to increase by 4.3% over the next five years, fuelling the residential market where demand already significantly outweighs supply thanks in part to a 90,000-strong student population. Manchester currently offers rental yields of 6.8% (2), the highest in the UK.

(1) JLL (2) LendInvest

MELBOURNE

Investing

Affordability Ratio: 9.7

  • World’s most liveable city six years running to 2016 (1)
  • Predicted to overtake Sydney as country’s biggest city by mid 2050s
  • Prices up 2.1% March to May, 13.9% year on year to May 2016 (2)

Melbourne has become Australia’s fastest-growing city and is set to overtake Sydney as the country’s biggest city in the mid 2050s with over 8 million people. One explanation for this growth is the lifestyle on offer – with the Economist Intelligence Unit’s Global Liveability Index ranking Melbourne number one for six consecutive years. Apartment prices have increased by an average of 5% per annum over the past decade, accelerated in recent years with Melbourne displaying average growth of 11% in the year to February 2016. In May 2016 a vacancy rate of just 2.0% was recorded (3) with prices up 13.9% over the 12 months to May.

(1) Economist Intelligence Unit (2) RP Data (3) SQM Research

TOKYO

Investing

Affordability Ratio: 4.3

  • Historic-low interest rates continue to favour investors
  • Apartment sales in Tokyo’s three central wards have increased 20.3% from last year
  • Rental yields of up to 6.2% achievable

Japan remains the world’s third-largest economy with Tokyo the main growth engine – of the nation’s USD4.1 trillion GDP in 2015, almost half (USD 1.9 trillion) was driven by the capital. Since 2000, the population in Tokyo’s central five wards has increased 34% to 1 million, driven by growing migration from the rest of Japan and driving up demand in these areas specifically. In Tokyo’s three central wards (Chiyoda, Chuo and Minato), apartment sales have gone up 20.3% from last year. This marks price growth for 43 consecutive months. Across Tokyo, rental yields of up to 6.2% are achievable with the 2020 Olympic Games set to further drive economic and employment growth as well as and infrastructure investment.

LIVERPOOL

Exploring

Affordability Ratio: 5.3

  • A Northern Powerhouse city and the second largest regional economy in the north
  • GBP5.5 billion invested in the city in the past decade
  • High average rental yields of 6.56%(1)

Just one hour’s drive from the UK’s largest regional economy of Manchester, neighbouring Liverpool offers plenty of potential, with over GBP5.5 billion invested into regeneration schemes in the city in the past decade. The city is home to over 66,000 students across five universities and its city centre is within 1.5 hours’ drive of more than 500,000 businesses, meaning there is plenty of rental demand, so much so that average rents in the city increased by 11% in 2015 (2). Private rents are expected to rise by a further 22% by 2020 (3).

(1) HSBC (2) HomeLet (3) National Housing Federation

ADELAIDE

Exploring

Affordability Ratio: 6.4

  • 5th most liveable city in the world and 2nd Australian city behind Melbourne
  • Population forecast to grow 22% over the next 20 years to 2036 (1)
  • Median prices in Adelaide have increased 3.9% year on year to May 2016 (2)

The second most liveable city in Australia, Adelaide offers lower property prices on average than Sydney or Melbourne, low vacancy rates of 2% in May 2016 (3) and stable rents. Dwelling values increased 2.6% in the quarter to May 2016, and 3.9% over the preceding 12 months (4), while average apartment gross rental yields of 5.1% have been recorded (5). In addition, foreign buyers enjoy stamp duty savings when compared to buying property in the states of Victoria, Queensland and New South Wales.

(1) Urbis/ABS (2) RP Data (3) SQM Research (4) CoreLogic (5) Knight Frank, Residex, ABS

TORONTO

Exploring

Affordability Ratio: 6.7

  • FX advantage strong with Canadian dollar on downward trend since 2012
  • Population forecast to increase by 15% in the 15 years to 2026
  • Apartment prices increased 7.7% year on year to June 2016 (1)

Canada’s most populous city is forecast to become even more so. In 2011 the population was calculated at 2,575,730 and is forecast to expand to 2,957,275 by 2026, an increase of 15% (2). The growing population has already driven an increase in the price of apartments of 7.7% in the year to June 2016, with transaction volumes also increasing by 7.2% in the same period. With the Canadian dollar on a downward trend, foreign investors can enjoy better value, particularly in Toronto over other Canadian cities such as Vancouver, where the state of British Columbia recently announced an additional 15% tax on foreign investors buying property (3).

(1) trebhome.com (2) Toronto.ca (3) Financial Post

LOS ANGELES

Exploring

Affordability Ratio: 8.1

  • Second largest city in the US with an estimated population of 4 million people
  • Occupancy rate is 97% in downtown LA
  • Condominium prices were up 7% year on year to December 2015 (1)

Los Angeles is the US’s second largest city with a population of 4 million in 2016 and a Gross Metropolitan Product of USD888 billion in 2015. The city represents a strong property market for investors; with its resilience illustrated by its relatively fast recovery following the global financial crisis. In 2015 median sale prices surpassed their pre-recession levels and continued development is expected. There remains room for growth as although condominium prices were up 7% year on year to December 2015, they remain 10% below peak values (2).

(1) Trulia (2) Case Shiller HPI

HAMBURG

Exploring

  • Population set to swell by additional 360,000 by 2025 (1)
  • USD15 billion regeneration of Hamburg’s HafenCity – the largest in the EU to date
  • Apartment prices up 14% in 2015 (1)

Recently rated number two on PWC and the Urban Land Institute’s Emerging Trends in Real Estate – Europe list, Hamburg has the highest GDP per capita in Germany, and the third in Europe. The city is experiencing investment and regeneration with its Hafencity project the largest in the EU to date at USD15 billion. In the last five years, property prices have increased by 40% with strong demand putting pressure on prices and exceeding supply by as much as 33% in 2014 (2). Rents are predicted to rise by 9.6% by 2018 (3). Hamburg is also attractive to investors as it offers a lower property tax of 4.5% when compared to Berlin’s 6%.

(1) Hamburg.de (2) Cologne Institute for Economic Research (3) HSH Nordbank

VIENNA

Exploring

  • 10.1% population growth in last ten years, with 27% increase expected by 2060 (1)
  • 50% supply deficit for 1-bed apartments (2)
  • 10.5% average property price increase per year over past five years (3)

Vienna has held the number one spot in the Mercer Quality of Living index for the past seven years to 2016. In addition, it ranked number three on the innovation cities index in 2015. Over the last ten years, Vienna has experienced 10.1% population growth and a further 27% population increase is expected by 2060 (1) with 300,000 new residents expected in the next ten to 15 years following growth of 43,200 in 2015 (up 2.4%) (2). A 50% supply deficit for one-bed apartments is predicted with less than 5,000 new apartments supplied and demand for 10,000 in the next ten to 15 years (2). In line with this rents were up 2.5% in Vienna during 2015 (4) with average apartment prices up 2.1% in 2015 and the total value of apartments in Vienna valued at EUR7.2 billion at the end of 2015, marking an increase of EUR1.2 billion during 2015, or 19.7% (5).

(1) Austria.org (2) Georg Spiegelfeld (3) Remax (4) Wohnet.at (5) RE/MAX-ImmoSpiegal

BARCELONA

Approaching with caution

  • Spain’s second most populous city
  • Property prices up 6.4% in 2015 (1)
  • Top job creation and foreign investment hub in Europe

Barcelona is ranked number one in the European region in terms of job creation and foreign investment, and was ranked 12th on PWC and the Urban Land Institute’s Emerging Trends in Real Estate – Europe list for 2016 in prospects for investment. Price per square metre for property is significantly below its Q1 2007 peak which offers room for growth, with housing starting at 4% of its peak levels. Housing completions are also at 7.3% of peak levels, the lowest in history. Approach with caution as property tax is at between 10% to 12%.

(1) Lucas Fox Spain Q3/Q4 Market Report

SYDNEY

Approaching with caution

Affordability Ratio: 12.2

  • Growth strong but high pricing continues to undermine value
  • Prices up 6.6% March to May, 13.1% over the 12 months to May 2016 (1)
  • Search for value continues to be main barrier to investment

Sydney’s property market remains very active, but property prices start high – the median dwelling price is AUD782,000, significantly higher than closest Australian competitor Melbourne at AUD 590,000, putting sustainability of the city’s high levels of growth into question. Despite the fundamental property market drivers of high population growth and a growing, stable economy, the search for value can be challenging which undermines the city’s status as an accessible property investment market.

(1) RP Data

DUBLIN

Approaching with caution

Affordability Ratio: 4.5

  • Strong market growth but stability remains questionable
  • Apartment prices rose 3.9% in the year to March 2016 (1)
  • Average value of residential property rose by a moderate 0.7% in Q1 of 2016, up by 1.2% in the year to March 2016

A dwindling supply of houses in Dublin is pushing up prices, but tighter mortgage lending restrictions imposed by the Central Bank are helping to contain house price growth. However, prices are expected to continue their upwards trajectory, driven by demographic changes, rising employment and lower taxes. Questions remain over Dublin’s potential as a new financial and economic hub in a post-Brexit world, but a continued mismatch between the quantity of private investors entering and leaving the market means evidence of longer-term security is suggested before committing.

(1) Central Statistics Office

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