Sydney is the 18th most expensive place in the world to buy a luxury home, according to the 2012 Knight Frank and Citi Private Bank’s sixth Wealth Report.
Australia’s biggest city shot up the global rankings from 34th last year despite the report noting that “prime Australian prices have also slipped as affordability becomes an increasing constraint”.
Sydney also ranks as the 19th fastest-growing city in terms of global importance, though it not among the current 20 most globally important cities, headed by London, New York and Hong Kong, according to the Wealth Report, which surveyed more than 4,000 individuals worth on average more than US$100 million each.
Sydney also ranked among the top locations for retail property investors, with prime global retail yields edging close to 7%, just below top-ranking Shanghai.
According to the sixth Wealth Report, a square metre of prime Sydney residential property costs US$22,400, ranking it just below 17th-placed Manhattan at $23,300 per square metre.
Sydney is more expensive than St Petersburg ($20,200 per square metre) and nearly twice as expensive as Venice ($11,700 per square metre).
The list is headed by the city state of Monaco, the traditional playground of the ultra-wealthy, where one square metre of residential property costs $58,300.Click to enlarge
“Investors seeking a more conservative strategy have gravitated toward high-quality properties in central business districts in cities such as Beijing, London, Munich, New York, Paris and Sydney,” says Luigi Pigorini, CEO Citi Private Bank Europe, Middle East & Africa.
“Conversely, for those willing to accept more risk, high-growth markets, such as Asia and Latin America, may be able to generate more attractive returns relative to the US and Europe.
“Investors must remain cautious as global economic growth will continue to influence all property markets, and investors should measure their yield and return expectations taking growth into account,” Pigorini says.
Australia ranked as the seventh richest country in the world on a GPD per capita basis (total GDP divided by population).
Stephen Ellis, executive chairman of Knight Frank Australia, says if China continues to grow and commodity demand remains, there will continue to be a strong growth story for property in Australia.
“We are upbeat on prospects for cities like Perth and Brisbane that have strong links to the mineral and resources industries.
“The stable economy, relatively low debt and attractive yields have attracted many offshore investors to Australia,” he says.
The report notes that offshore investors that poured funds into Australia in 2011 included Memocorp, the Australian arm of Singapore billionaire Tay Tee Peng, who paid $395m for 259 George Street in Sydney, and South African investor Nathan Kirsh, who bought 4 and 14 Martin Place for $153 million.
Chinese, Russian, Middle Eastern, Latin American and those from other growth economies are expected to become most important as prime property buyers over the next five years.
The report found a global swing away from property among centa-millionaires to less risky assets like bonds, gold and cash.
But it expect further growth in interest in commercial property from high-net-worth individuals, forecasting US$74.1 billion of private transactions globally in 2012 (a 5% year-on-year increase).
The report says there are now 63,000 people worldwide with $100 million or more in assets.
There are now 18,000 centa-millionaires in the region covering south-east Asia, China and Japan.
This is more than North America, which has 17,000, and Western Europe, with 14,000.
By 2016, south-east Asia, China and Japan are forecast to extend their lead, with 26,000 centa-millionaires, compared with 21,000 in North America and 15,000 in Western Europe.
On a country-by-country basis, the US will still dominate in 2016, with 17,100 centa-millionaires, but China will be catching up fast with numbers set to double from current levels to 14,000.
“This year’s Wealth Report contains even more evidence that the world’s wealthy are weathering the economic slowdown better than the wider population, and nowhere is this better reflected than in prime property markets,” says Andrew Shirley, editor of The Wealth Report.
Those markets considered “safe-haven” locations continue to attract private investors looking for both prime residential and commercial property. Political and economic uncertainty across the world is only helping to exacerbate the trend.
“But it is not just property where HNWIs from fast-growing economies are making their mark. The Wealth Report’s Attitudes Survey reveals that they are playing an increasingly important role in the worlds of sport, fine art, wine, and philanthropy.”