These 12 cities will become favourite destinations for global real estate investors
Last Updated: May 13, 2014What value is there in brokers’ reports praising investment destinations? Just asking. Brokers write them because they’ve got property they want to get off their hands. Entirely unconnected, no doubt, with their praise for places where the properties are located. That said, let us look at The Candy GPS (global prime sector) report, which ranks Tel Aviv, Chennai, Panama City and Beirut among 12 second-tier cities which will see strong residential property price growth over the next five years, providing ultra-rich investors with alternative real estate investment opportunities. The report has been prepared jointly by Candy & Candy, Savills World Research and Deutsche Asset & Wealth Management. Second tier - Tel Aviv? Haha! That’s one in the eye for you guys! Beirut? Second tier? Chennai, I grant you. Anyway, according to this threesome of wise brokers, these cities are likely to “out-perform the real estate markets in prime world cities” namely London, New York, Hong Kong, Singapore and Moscow. "They range from well-known and very well established cities such as Melbourne in Australia to little-known but interesting centres in developing economies such as Chennai in India, that have a high number of ultra-high net-worth residents," said Yolande Barnes, director at Savills World Research. The 12 cities that our broking wizards say have strong potential for growth are Tel Aviv (Israel), Melbourne (Australia), Miami (USA), Dublin (Ireland), Panama City (Panama), Beirut (Lebanon), Istanbul (Turkey), Cape Town (South Africa), Jakarta (Indonesia), Lagos (Nigeria) and Chennai (India). Their report has listed a host of reasons which will make each of these cities favourite investment destinations for ultra-rich investors. Some of these reasons include English spoken as a first or second language, the establishment of new tech industries, abundance of green spaces or water and cultural hubs. Lagos, they seem to imply, is well known for its green spaces, cultural hubs, and high tech. Of these 12 cities, Tel Aviv is the most expensive with an entry-level, two-bedroom luxury apartment typically costing $1.45 million in March, whereas Chennai is the least expensive, a luxury two-bedroom dwelling costing around $160,000. “Canny investors with an already full ‘trophy asset’ portfolio are looking with more interest at the yields available from real estate,” said Paul Tostevin, associate director of Savills World Research, in the Candy Global Prime Sector report. “Those looking for income-producing properties are more likely to find high and rising rental incomes in the places where capital values have not been driven by UHWI (ultra-high worth individuals) inward investment.” What’s odd about their “buy list” is that in fact, foreigners face restrictions in buying property in many of these cities. Foreigners cannot buy property in Chennai, nor landed property in Indonesia. Arabs cannot buy in Tel Aviv. Australia is increasingly restrictive. So high-net buyers are likely to be disappointed if they try to buy from Candy IPS’s list. London, New York, Hong Kong, Singapore and Moscow at present account for 40% or $2.2 trillion of all global ultra-high wealth real estate investment. Candy IPS believes their second tier cities will shrink this allocation rapidly. Don’t hold your breath, say I.