World Cities Review for Autumn 2012 has been released by Savills. The 10 world cities covered in this report are New York, London, Paris, Moscow, Shanghai, Tokyo, Mumbai, Singapore, Hong Kong and Sydney.
First half of 2012 saw mixed trends. The 7.4% capital growth in Hong Kong was driven by the strengthening domestic market. But rents saw small falls, which provide further evidence of continued volatility. Moscow saw a buoyant 5.5% capital growth due to strong local incomes and limited stock. Also the high commodity prices, especially oil, continue to fuel affordability. Paris witnessed a negative 3.4% capital growth due to the impact of Eurozone crisis. Increased unsold inventory levels in Shanghai pushed the capital growth to -2.6%.
Typically super-hot market in Mumbai gave us a surprise; the capital growth was at -1.7%. Speculative demand is drying up due to apprehension of a real estate bubble. Many buyers are reported to be sitting out the market and waiting to see if there are more price corrections. Inevitably, this has led to a reduction in transaction numbers.
Mumbai has the highest population density among the cities covered in the report (population 20.5m, area 239² miles).
In Mumbai and Shanghai, the rental market outperformed the sales market in H1 2012, recording growth of 5% and 1.9% respectively. It is no coincidence that these two cities have seen the highest capital growth of any of our world cities since 2005 (150% and 137% respectively), and have among the lowest yields.
As the global capital value growth slowed last year, rental growth in several world cities began to catch up, which pushed the yields up. Global rental values grew by 4.1% between June 2011 and June 2012, compared to 2.1% in global capital values. Yields in New York are the highest of covered world cities, grossing 6.9% in June 2012. New York is a rental city, with solid demand across a wide tenant base, including strong corporate demand.
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