Worldclasscities 2011 Savilles

INSIGHTS
World Cities Review

AU T U M N 2 0 1 1
The 10 cities shaping global real estate
WORLD CLASS
HONG KONG LONDON MOSCOW MUMBAI NEW YORK PARIS SINGAPORE SHANGHAI SYDNEY TOKYO
KEY
EMPIRE STATE BUILDING ORIENTAL PEARL TOWER
EIFFEL TOWER
MARINA BAY SANDS SYDNEY OPERA HOUSE BANK OF CHINA ASAKUSA KANNON TEMPLE
BIG BEN
LONDON
ST BASILS CATHEDRAL GATEWAY OF INDIA
1 10
COST OF BUYING RANKING
POPULATION 7.5M AREA 607 MILES COST OF BUYING RANKING 2 CAPITAL VALUE GROWTH DEC 05-DEC 10 27% DEC 10-JUL 11 4%
NEW YORK CITY

POPULATION 8.3M AREA 469 MILES COST OF BUYING RANKING 7 CAPITAL VALUE GROWTH DEC 05-DEC 10 10% DEC 10-JUL 11 -2%
PARIS
ILLUSTRATIONS ADAM POINTER
Welcome to Savills World Class index. Following the success of our Four Global Cities Review in the Spring, we are now reporting on 10 cities that all compete for real estate investment on the world stage. These form our first World Class index of residential real estate price movements from 2005. There are many cities on this planet
that claim global status. Some rank top in terms of lifestyle, quality of life, places to do business,tax havens,cities of culture.Twenty six of the worlds cities are megacities, with populations of over 10 million people. Although some of Savills World Class cities are megacities and most rank highly on the plethora of global measures, their
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WORLD CITIES REVIEW
SHANGHAI MOSCOW
TOKYO
POPULATION 13.0M AREA 240 MILES COST OF BUYING RANKING 3 CAPITAL VALUE GROWTH DEC 05-DEC 10 49% DEC 10-JUL 11 -3%
1 10
HONG KONG
MUMBAI
SINGAPORE
key qualification is an active and growing worldwide market in residential real estate. Our cities all have sizeable non-domestic sales and lettings markets and growing interest in them from overseas investors and occupants. They are cities that often feature as relocation and expansion targets on the lists of international companies.
SYDNEY
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WORLD CITIES REVIEW
THE PERFORMANCE AND FUTURE PROSPECTS OF OUR WORLD CLASS CITIES
HOW THE TOP 10 WORLD PLAYERS COMPARE

just 1,800 sq ft (although the Moscow executive would also likely have a large dacha or villa, in the nearby countryside for the weekends). We have also measured any second homes that people are likely to occupy as well. The international stereotypes of residential accommodation in different locations are not always accurate. Parisian dwellings are among the smallest while Shanghai residents enjoy some of the biggest, for example. Savills World Class index overcomes the differences between buildings by measuring the cost of housing an identical group of people in different countries.
here is a difficulty in measuring residential real estate across continents because the way people live and what they expect differs greatly so too does the size and style of their homes. Even the way the size of the home is measured differs from country to country. (We have standardised all measurements here to GIA: Gross Internal Area). This, in itself gives some interesting results: a CEO in Sydney, Australia, might expect to occupy a large house totalling over 10,000 sq ft for example, but the same executive in Moscow would more likely find themselves in an apartment of 2
SAVILLS EXECUTIVE UNIT (SEU) By comparing a group of real people, our cost comparison of residential real estate has a real world relocation story at its heart. We take a typical executive unit, a group of people that might start up or expand a global business in any country, and then compare the residential accommodation that they would be likely to inhabit in each of the world cities. The people who make up Savills Executive Unit (SEU) include one middle aged ex-pat CEO, one senior ex-pat director, a locally employed director and four locally-employed administrative staff. They each live in different types of 1
COMPARING WORLDWIDE PROPERTY SIZES

SEU PROPERTY SIZE RANK AVERAGE SQ FT GIA* PER SEU HOUSEHOLD NON-CEO PROPERTY SIZE RANK AVERAGE SQ FT GIA* PER NON-CEO HOUSEHOLD
ALL IN THE NUMBERS
3000 2500 2000
10
1500
10
NEW YORK LONDON PARIS

3
SHANGHAI SINGAPORE MUMBAI TOKYO NEW YORK LONDON PARIS HONG KONG MOSCOW
1200
SYDNEY
1500 1000
900
600
CEO PROPERTY SIZE RANK AVERAGE SQ FT GIA* PER CEO HOUSEHOLD
RATIO OF SIZE OF THE CEO PROPERTY COMPARED TO THE AVERAGE NON-CEO PROPERTY
12000 10000 8000 6000 4000 2000 0
10
SHANGHAI SINGAPORE MUMBAI TOKYO NEW YORK LONDON PARIS HONG KONG MOSCOW
8
SYDNEY
SYDNEY SHANGHAI SINGAPORE MUMBAI TOKYO
SHANGHAI SINGAPORE MUMBAI
HONG KONG MOSCOW

6
TOKYO
*GIA (GROSS INTERNAL AREA)
SYDNEY
3
NEW YORK
4
LONDON
6
PARIS
3
HONG KONG
2
MOSCOW
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WORLD CITIES REVIEW
By comparing the accommodation costs of Savills Executive Unit we can truly compare the cost of residential real estate across some very different global cities
SAVILLS EXECUTIVE UNIT (SEU) CONSISTS OF...
There have been big differences in the performance of individual cities: Mumbai grew by 154% over the last five and a half years, while New York is up only 7% over the whole period. There was no uniform pattern to price movements some cities like London, Hong Kong and Mumbai saw a 2007 peak, followed by a 2009 trough and subsequent value rebound. Other cities have seen no trough, either, like Shanghai and Singapore growing substantially with only a minor slowdown in 2009, or, like Paris and Sydney, seeing modest growth and a shallow trough on an upward-sloping plateau. OLD WORLD VERSUS NEW WORLD The biggest difference in performance can be seen between what might be called the old economies of Tokyo, London, Paris, Sydney and New York (which grew on average by 32% since 2005) and the new, or emerging, economies of Shanghai, Singapore, Hong Kong, Moscow and Mumbai which grew, on average, by 123% over the same period. It becomes apparent that the debtinduced crisis of 2008 was suffered most by the old world cities and not new world ones. The biggest old world value rebounds have been experienced in those cities that are most open to new world investment, most notably London, Sydney and Paris. Hong Kong is the most expensive city in which to buy all the properties to house the SEU. It is followed by London, with Tokyo, Singapore and Paris close behind.
MIDDLE AGED EX-PAT CEO
SENIOR LOCALLY EX-PAT EMPLOYED DIRECTOR DIRECTOR
RELATIVE COST OF BUYING

(AVERAGE = 100)
LOCALLY EMPLOYED ADMIN STAFF
250 200 150 100 50 0
household, some with children, some with partners and some without and each member of the group chooses different types of locations and different types of property in which to live. It is by comparing the accommodation costs of these people that we can truly compare the cost of residential real estate across some very different global cities. WORLD CLASS PRICE MOVEMENTS The value of all properties, owned by the SEU, in all cities, rose by 77% on average between December 2005 and June 2011. Growth in the last six months was 6% and the index is expected to continue rising to the end of this year at a more subdued rate.
TOTAL INDEX MOVEMENTS

GLOBAL NEW WORLD OLD WORLD
PRICE GROWTH
DEC 05 - JUN 11
MUMBAI SHANGHAI SINGAPORE
250
200
HONK KONG MOSCOW PARIS
150
TOKYO LONDON
100
SYDNEY
DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN 05 06 06 07 07 08 08 09 09 10 10 11
NEW YORK
154% 143% 123% 98% 94% 49% 44% 32% 27% 7%
VALUE RANKINGS After five years of very high price growth Hong Kong is now significantly more expensive than the other 10 cities Hong Kong is characterised by limited land supply for expansion and price growth that has been fuelled by overseas cash (particularly from mainland China). It has seen government measures, which have started to cool the lower end of the market but we still expect to see growth in the remainder of 2011. The cities of London, Tokyo and Paris cost very similar amounts, near to the World Class average, while Sydney and New York look good value in the old world, rivalling Shanghai and Moscow in cost terms. At the other end of the scale, Mumbai costs 43% less than the average of all 10 cities to house the whole SEU but it is growing very fast from this low base.
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LONDON TOKYO SINGAPORE PARIS SHANGHAI NEW YORK SYDNEY MOSCOW MUMBAI
HONG KONG
WORLD CITIES REVIEW
THE RENTAL DIVIDEND

he total annual cost of renting all the accommodation needed by the SEU for one year averages 257,000 across all 10 cities, ranging from 366,000 in London to 115,000 in Mumbai. For any relocating or expanding business, these are sums worth noting in addition to office costs; they will impact on any rental allowances and relocation allowances for ex-pat staff and will probably have an impact on the pay demands of local staff too. London and Paris have the highest rental levels of the 10 World Class cities and these are fuelled by domestic, as well as corporate, demand as would-be purchasers are pushed into the rental sector due to credit restrictions. Hong Kong, Tokyo and New York are also high priced rental cities and, in common with all of the top five, are driven by ex-pat/corporate demand at the top levels. WORLD CLASS RENT MOVEMENTS Rents have moved, on average, across all cities at a slower pace than capital values, suppressing yields. There is an old world/ new world difference in the growth of rents but it is not as pronounced as with capital values. This highlights that strong capital-growth-motivated investment is driving capital values in the new world, meaning that yields are moving much faster in these cities. In consequence, it might be said that there is a stronger case for rental-return-motivated investment in the cities of the old world.
EXPANDING OR RELOCATING? ACCURATE RENTAL COST RANKINGS ARE KEY
THE RELATIVE COST OF RENTING
150 120
AVERAGE = 100
90 60
HONG KONG TOKYO NEW YORK SINGAPORE

NEW WORLD
JUN 07 DEC 07 JUN 08 DEC 08
LONDON PARIS
30
COST OF RENTAL GROWTH INDEX

150 140 130 120 110 100
DEC 05 JUN 06 DEC 06 JUN 09 DEC 09 JUN 10 DEC 10 JUN 11
GLOBAL
OLD WORLD
% % 5.1 3.6
OLD WORLD NEW WORLD
RENTAL YIELD AVERAGE
TOTAL ANNUAL COST OF SEU RENTAL ACCOMMODATION

LONDON
366,000
AVERAGE
257,000 115,000
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SYDNEY MOSCOW SHANGHAI MUMBAI

MUMBAI
HONG KONG
DEMAND AT THE TOP OF THE HONG KONG MARKET IS SETTING RECORDS
ong Kongs rise since 1997 to become a key global financial centre, if not the key financial centre in the region, has been meteoric. Occupier demand and buyer confidence in the citys residential real estate has been equal to it so price growth has also been spectacular, despite experiencing a temporary knock by the global banking crisis of 2008. While genuine occupier demand, evidenced by rental increases, is strong, demand for the purchase of trophy assets is stronger. There is huge demand for investment properties from the Chinese mainland, coupled with restricted supply. Cash-rich buyers therefore continue to buoy prime markets. Despite attempts to introduce cooling measures, strong interest in traditional areas, means that luxury prices in MidLevels, Southside and The Peak continued to outperform other markets. Overwhelming demand for property at the very top of the market is setting global records. The extreme scarcity of prime houses on The Peak is perhaps an exaggerated caricature of the fundamental problem affecting all World Class cities; there are simply just not enough of the most desirable properties to go round. Rents have not kept pace with this capital growth in Hong Kong so yields have come in even though leasing supply is limited.
HONG KONG KEY FACTS

SAVILLS EXCUTIVE UNIT (SEU)
SEU CAPITAL
SEU CAPITAL COST IN RELATION TO THE WORLD CLASS AVERAGE
+107%
AVERAGE
COST RANKING
SEU RENTAL COST IN RELATION TO THE WORLD CLASS AVERAGE
SEU RENTAL
COST RANKING
AVERAGE RENTAL YIELD
1
AVERAGE
WORLD CITIES REVIEW
3.1%
DEC 2010 JUN 2011
+24%
AVERAGE CAPITAL GROWTH
DEC 2005 DEC 2010
79%
11%
SEU AVERAGE...
TOTAL SQ FT PER SQ FT
1,370
Hong Kongs extreme scarcity of prime houses is an exaggerated caricature of the problem affecting all World Class cities
CHINA SEU RENTAL
1,090 1.610
SQ FT
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3.1%
LONDON HONG KONG
WORLD CITIES REVIEW
LONDON
A LONDON PROPERTY IS STILL VIEWED BY MANY AS SAFE STORE OF WEALTH

lthough no longer the most expensive bricks and mortar in the world, London property is still highly valued. The purchase of a London house or flat is viewed by many global players as a safe store of wealth. Showing lower growth but also much less volatility than many of its new world counterparts, there appears to be some foundation for this view of London. Across the citys prime areas, international buyers constitute 40% of the market by value. Even in the suburbs, Greater London is a cosmopolitan city. As an established global city and major financial centre, London attracts businesses and residents from every part of the world as well as a strong investor market, currently buoyed by sterlings weak exchange rate. Demand for rental property is strong, and is fuelling rent rises. Both corporate demand (which has been growing with economic recovery) in the upper tiers of the rental sector and domestic demand from would-be purchasers, unable to obtain credit, has been encouraging rent rises. This is a common story in the debt-reliant western world. A steady inflow of overseas equity (which we estimated last year to total 3.7 billion) has fuelled price rises in the London market and seen it substantially outperform the rest of the UK. The value of the executive unit accommodation is near its former peak but we do expect that growth will ease over the next year or so.
LONDON KEY FACTS
SEU CAPITAL
+27%
AVERAGE
COST RANKING
SEU RENTAL
COST RANKING
1
27%
2
AVERAGE LONDON
5.1%
DEC 2010 JUN 2011
+42%
DEC 2005 DEC 2010
4%
SEU AVERAGE...
London attracts residents and businesses from every part of the world, plus the weak exchange rate buoys a strong investor market
UK
1,160 1.610
SQ FT
- 08 SAVILLS.COM
740
TOKYO
VALUING LAND OVER BUILDINGS MAKES TOKYO A UNIQUE MARKET

TOKYO KEY FACTS
SEU CAPITAL
okyo residential real estate is perhaps one of the most different of the World City markets in that it is land that is valued, not the building. Tokyos dwellings are similar to a new car in that the value will depreciate almost as soon as it is built. Housing is assumed to have a limited lifespan and generally replaced after 20 to 40 years. After a decade-long housing slump, steady price appreciation was seen from the mid-2000s until the financial crisis of 2008, which saw prices fall back again. Values picked up in late 2009, but the recent earthquake cooled demand, particularly in the luxury market, although the mid-market is said to be stable. Although rents have also declined since the mid-1990s, property prices have fallen faster, pushing out yields. This should provide a buying opportunity for Japans Real Estate Investment Trusts ( JREITs). They were particularly big investors between 2005 and 2007, until the onset of the financial crisis. Their renewed interest in high rental income could cause yields to harden again. The types of properties rented are very different to the types of those for sale. Rental properties are purpose-built, located in and around the central business districts, targeted at employees of those areas, and command the higher prices. For purchase, inhabitants are more likely to choose detached houses in the suburbs. Admin staff will still live in the city centre, but in very small apartments or commute from cheaper accommodation in one of many sleeper cities.
+12%
AVERAGE
COST RANKING
SEU RENTAL
COST RANKING
4
49%
4.2%
-3%
DEC 2010 JUN 2011
3
AVERAGE LONDON
WORLD CITIES REVIEW
+23%
DEC 2005 DEC 2010
SEU AVERAGE...
Although Tokyos rents have also declined since the mid-1990s, property prices have fallen faster, pushing out yields
JAPAN
1,330 1.610
SQ FT
- 09 SAVILLS.COM
830
TOKYO
WORLD CITIES REVIEW
SINGAPORE
THE CITY WITH THE WORLDS HIGHEST CONCENTRATION OF MILLIONAIRES

SINGAPORE KEY FACTS
SEU CAPITAL
+10%
ith annualised growth in residential prices currently running at 16%, Singapore is a new world market writ large. Property prices have boomed since the economy rebounded in 2009.The average price rise of properties in the executive unit was 123% between Dec 05 and Jun 11. The city states open door policy towards top end foreign economic contributors, who traditionally gravitate towards prime districts, means rental demand is high. Investor demand is also strong because Singapore has the highest concentration of millionaire households in the world (16% with $1 million plus), and their capacity to buy residential property is obviously high. As foreigners without Permanent Residency status are generally only permitted to purchase private apartments and condominiums, the weight of foreign money in this segment of the Singapore residential market has also buoyed both prices and rentals. The rises have been fuelled by a strong economy, ever increasing international purchasers from a booming Asia region, coupled with tightly restricted land supply and, at the very top of the market, extremely limited stock. This looks set to remain unalleviated in the foreseeable future as new land for development is limited and price growth in the luxury homes market is likely to be sustained.
AVERAGE
COST RANKING
SEU RENTAL
COST RANKING
6
92%
4
-2%
AVERAGE SINGAPORE
4.1%
DEC 2010 JUN 2011
DEC 2005 DEC 2010
16%
SEU AVERAGE...
The rises have been fuelled by a strong economy, increasing international purchasers, restricted supply and extremely limited stock
1,610 1.610
SQ FT
- 10 SAVILLS.COM
590
PARIS
UPWARD PRICE MOVEMENT CONTINUED IN 2011 WITH STRONG DEMAND

s an international, cultural centre, Paris rivals London and is currently seeing almost as much overseas investor activity. It is nevertheless a very different real estate market with a small and constrained prime centre made up almost exclusively of apartments. Residential stock in prime central Paris is largely historic, with very few new developments and very few houses. There is strong international demand at the top end of the Paris market, and increasing investment from BRIC economies, particularly while the Euro remains weak. Against this, prices are driving upwards on the back of the shortage of new supply. Upward price movement continued into 2011, with sustained strong demand and few available properties. Positive growth in transaction volumes and prices in 2011 has been largely in the rare new apartment segment. Price growth across the whole Ile de France region is being led by central Paris, in much the same way as central London is leading growth in Greater London and the Home Counties. Also similar to many World Class cities, Paris with its historic fabric and bounded by the inner suburbs has very constrained land supply and expansion potential. Like many old world cities it will rely on the regeneration of old industrial and deprived areas to create new 21st century living quarters.
PARIS KEY FACTS
SEU CAPITAL
+10%
AVERAGE
COST RANKING
SEU RENTAL
COST RANKING
2
35%
4.6%
DEC 2010 JUN 2011
5
AVERAGE PARIS LONDON
WORLD CITIES REVIEW
+41%
DEC 2005 DEC 2010
10%
SEU AVERAGE...
There is strong international demand at the top end of the Paris market and investment from BRIC economies
FRANCE
1,120 1.610
SQ FT
- 11 SAVILLS.COM
740
WORLD CITIES REVIEW
SHANGHAI
RAPID ECONOMIC GROWTH HAS FUELLED GROWTH IN THE HOUSING MARKET
hanghais metro population is the largest in China, described as the showpiece of the booming economy of mainland China. Rapid re-development began in 1990s, and Shanghai is now a national financial centre and aspires to be an international financial centre by 2020. Shanghai ranks fifth in the latest edition of the Global Financial Centres Index. The rapid economic growth has fuelled a substantial rise in the housing market. A number of government measures, including property taxes, have since been applied to cool the market and these appear to have had an effect this year, particularly on the top end of the market, where investor activity is concentrated. Shanghai, like most other first and second-tier cities in China, has announced that it plans to keep annual residential price growth from exceeding annual growth in the municipalitys GDP and disposable income.This equates to roughly 8%. Although low in relation to recent growth, there is a large social housing programme underway, which will lower the average price (so Shanghai will hit the target) and values are not likely to fall off a cliff. Although prices have risen steeply, rents have not moved much (until recently) and yields are consequently very low. Controls to cool prices can have the side effect of stimulating rental growth so, although Shanghais rents have not moved much yet, the prospects for growth are good. Demand is growing from a cooling sales market and corporate activity, including expats, plus inward migration and investment.
SHANGHAI KEY FACTS
SEU CAPITAL
-21%
AVERAGE
COST RANKING
SEU RENTAL
COST RANKING
9
136%
2.2%
DEC 2010 JUN 2011
6
AVERAGE SHANGHAI
-53%
DEC 2005 DEC 2010
3%
SEU AVERAGE...
Controls to cool prices can have the side effect of stimulating rental growth so the prospects for growth look good
CHINA
1,620 1.610
SQ FT
- 12 SAVILLS.COM
400
NEW YORK
THE BIG APPLE HAS SHOWN THE LEAST GROWTH OF ANY OF THE TOP 10
ew York at least is a part of the Americas that can now call itself old world. New Yorks residential real estate displays all the characteristics shown by the other debt-reliant North Atlantic economies, which suffered from the financial crisis of 2008. New York has shown the least growth of any of the World Class of 10 still standing at its 2005 level. As a stable, high quality, established and cosmopolitan world financial and cultural centre, New York is looking exceptionally good value at present. New York, as a global city, has outperformed the national average over the same period. Once again, the global city characteristics of constrained space, little new development and burgeoning global demand has saved NY from the fate of continued falls but, although international purchasers are a growing presence, they are not on the scale of some cities such as London. The Big Apple is a rental town, and largely an American one, although the Venezuelans, French, Germans and Chinese are all present in the market and, at the super-high end, Russian buyers. Overseas buyers are often looking for good student accommodation for their offspring. With the economy still struggling and no impact from bonuses on Wall Street this year, prospects for growth are still weak but lengthened yields and longer term prospects offer some incentives.
NEW YORK KEY FACTS
SEU CAPITAL
-31%
AVERAGE
COST RANKING
SEU RENTAL
COST RANKING
5
10%
6.2%
-2%
DEC 2010 JUN 2011
7
+21%
AVERAGE NEW YORK LONDON
WORLD CITIES REVIEW
DEC 2005 DEC 2010
SEU AVERAGE...
The Big Apple is a rental town, and it is largely an American one

NORTH AMERICA
1,230 1.610
SQ FT
- 13 SAVILLS.COM
520
WORLD CITIES REVIEW
SYDNEY
A STABLE INVESTMENT CHOICE WITH AN ESTABLISHED HOUSING MARKET

SYDNEY KEY FACTS
SEU CAPITAL
ydney has long had a high profile on the global stage but might be described as only recently bursting forth into the World Class when it comes to residential real estate. It is a stable and high-quality old world investment choice with a well established luxury housing market within an emerging New World region that is booming, although domestic affordability pressures coupled with global economic uncertainty has put pressure on prices in recent months. Our analysis of the executive unit housing would seem to illustrate that recent stagnation is confined to the very top and bottom of the market, varying suburb by suburb. Following fears that overseas buyers were contributing to a housing bubble, restrictions were placed on the purchase of homes by foreigners, which have had some impact on transactions. The average growth rates shown therefore disguise some extremes around the average, while an underlying housing shortage remains. The citys undersupply of accommodation and high in-migration plus restrictions on new development (due to zoning and geography) are likely to keep prices the highest of any Australian city. It would appear that Sydney is beginning to display many of the common characteristics of the World Class city constrained land supply, increasing pressure from overseas investors and high demand for prime accommodation but it is unusual in offering very spacious living accommodation in relation to other world cities.
-33%
AVERAGE
COST RANKING
SEU RENTAL
COST RANKING
7
21%
4.7%
DEC 2010 JUN 2011
8
+23%
AVERAGE LONDON SYDNEY
DEC 2005 DEC 2010
5%
SEU AVERAGE...
Sydneys undersupply of accommodation, high inmigration and restrictions on new development are likely to keep prices high
AUSTRALIA
2,590 1.610
SQ FT
- 14 SAVILLS.COM
380
MOSCOW
THE FASTEST GROWING OF THE WORLD CITIES BETWEEN 2005-2008

MOSCOW KEY FACTS
SEU CAPITAL
oscows prime markets are much more reliant on domestic buyers and are far less cosmopolitan than London or Paris. Consequently, the performance of the Russian domestic economy is tightly interwoven with the performance of its residential property. The markets were hit badly in 2008 and 2009 by economic recession as global demand for Russias energy resources plummeted and the domestic economy faltered. Investment in Moscows residential real estate has closely followed the money being made in the national economy, primarily in raw commodities such as oil. As a market driven by domestic buyers, Moscows residential real estate market reflects the volatility of a fast growing emerging market but has also shown the growth to match. Moscow was the fastest growing of the 10 world cities between 2005 and 2008. Since global commodity prices have rallied, there has been renewed vigour in the market and prices are rising again, albeit not at the same rate as pre 2007. Moscow currently stands fifth in terms of growth levels over the whole period, just below Hong Kong. Like all of the World Class cities under study, Moscows residential supply struggles to keep pace with demand. Measures are being put in place to boost housing delivery in an attempt to improve price stability but how successful they will be remains to be seen.
-38%
AVERAGE
COST RANKING
SEU RENTAL
COST RANKING
8
84%
5.6%
DEC 2010 JUN 2011
9
AVERAGE LONDON
WORLD CITIES REVIEW
-29%
DEC 2005 DEC 2010
6%
SEU AVERAGE...
Driven by domestic buyers, Moscows residential real estate reects the volatility of a fast growing, emerging market
RUSSIA
1,050 1.610
SQ FT
- 15 SAVILLS.COM
470
MOSCOW
WORLD CITIES REVIEW
MUMBAI
THE NEWEST ADDITION TO THE LEAGUE OF WORLD CLASS CITIES

MUMBAI KEY FACTS
SEU CAPITAL
umbai is the newest addition to the league of World Class cities and is perhaps feeling uneasy in its role. Like all of the new world economies in this report it has seen high levels of (volatile) price growth, albeit off a low base, and currently stands the highest performing residential real estate market since 2005. There is a widespread sense that the extraordinary house price growth seen in recent years, despite the 2008 downward correction, is unsustainable. As is the way when cities come on to the world stage and adjust from being national capital to World Class cities, house prices in Mumbai have become unaffordable for many ordinary people. The pressures of growth and demand impinge on Mumbai in much the same way as they do on Hong Kong and Singapore. Mumbai is physically constrained by being on a peninsula where significant infrastructure investment is required for the city to expand. There is widespread feeling in the city that Mumbais housing market is a bubble waiting to burst, but whether this is the case, or whether it is entering a new global league of internationally priced cities, remains to be seen. This basic pressure on space has pushed up the cost of accommodation for everyone. Mumbai has seen spectacular growth in rents, up 69% over five years, but capital values grew 138% over the same period, suppressing yields.
-43%
AVERAGE
COST RANKING
SEU RENTAL
COST RANKING
10
138%
10
AVERAGE
3.1%
DEC 2010 JUN 2011
-55%
DEC 2005 DEC 2010
7%
SEU AVERAGE...
There is a widespread feeling in the city that Mumbais housing market is in a bubble waiting to burst
INDIA
1,450 1.610
SQ FT
- 16 SAVILLS.COM
320
MUMBAI LONDON
WORLD CITIES REVIEW
THE INTERNATIONAL SUPER-WEALTHY

orld Class cities not only attract international business people but are also the haunt of the super-wealthy. Global billionaires who can make any country their home, and often have several different residences across the globe, are important inward investors in residential real estate. It is interesting that, in the cities where average dwelling sizes are among the smallest (e.g. Paris and Tokyo) billionaires will occupy amongst the largest spaces of any city.They are buying what is most rare. In Moscow, where the billionaires city dwelling is a relatively modest 4,600 sq ft, this is compensated by an enormous 21,500 sq ft mansion in the nearby countryside. VALUE RANKING In Hong Kong, the rarest commodity on the island is houses on The Peak, and Southside. Although they rank among the smallest World Class billionaire properties (at around 5,200 sq ft), each of those square feet is the most expensive in the world.Tokyo is the next most expensive, due to exceptionally high land values in central Tokyo, although it is not a market known for international billionaires (most would be Japanese). Billionaires properties tell a different story to the executive unit.The ultra prime, billionaires markets in all cities out-performed during the boom of 2007 and have also out-performed the SEU in the six months to June 2011.This reflects the rate at which new billionaires have been created across the globe and the rate at which they have invested in global real estate in both emerged new worldcities and in established old worldones like London, Paris and New York. PROSPECTS FOR FUTURE INVESTMENT These established western markets have seen steady growth but not the same volatility as cities in the new world, making them attractive safe havensfor billionaireswealth. We anticipate that Sydney, for example, has this potential in the Pacific region.
THE WORLD CLASS BILLIONAIRE HOMES MARKET IS PERFORMING WELL
It is likely that the World Class billionaire homes market will continue to out-perform other markets for as long as the boom in global commodities and other markets continues and helps create new billionaires. There are already signs that a wall of money from this sector is waiting to get out of China so currency export restrictions are a key indicator for investors to watch there. Continuing political upheaval, war and civil unrest in various other parts of the world, will ensure that there is continued demand from the international elite for safe havens in World Class cities. Unfortunately, this demand is assured for the foreseeable future. We increasingly expect that some of this demand will find its way to new world cities as well as the oldin future.
AVERAGE PROPERTY SIZE

SEU SIZE RATIO COMPARED TO BILLIONAIRE
SYDNEY TOKYO SINGAPORE PARIS LONDON MUMBAI NEW YORK SHANGHAI HONG KONG MOSCOW
19,380 SQ FT 16,010 SQ FT 12,300 SQ FT 10,760 SQ FT 7,860 SQ FT 6,790 SQ FT 6,500 SQ FT 5,380 SQ FT 5,200 SQ FT 4,630 SQ FT
7 x 12 x 8 x 10 x 7 x 5 x 5 x 3 x 5 x 4 x
SEU AVERAGE SEU AVERAGE SEU AVERAGE SEU AVERAGE SEU AVERAGE SEU AVERAGE SEU AVERAGE SEU AVERAGE SEU AVERAGE SEU AVERAGE
GLOBAL BILLIONAIRES
BILLIONAIRE VS EXECUTIVE UNIT
BILLIONAIRES SEU
PER SQ FT FOR BILLIONAIRE PROPERTY

HONG KONG TOKYO PARIS LONDON MOSCOW NEW YORK SHANGHAI SINGAPORE MUMBAI SYDNEY
200
150
100 DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN
05 06 06 07 07 08 08 09 09 10 10 11
6,700 5,190 3,270 3,090 2,520 2,270 1,320 1,000 710 590
83%
HONG KONG
10%
CAPITAL GROWTH OF BILLIONAIRE PROPERTY

DEC 05 - DEC 10 DEC 10 - JUL 11
11%
-2%
TOKYO
49% 32%
PARIS
23% 3%
38%
LONDON
3%
110%
MOSCOW
2% 7%
26% 21%
NEW YORK
0%
SHANGHAI
144%
SINGAPORE
16%
138%
MUMBAI
SYDNEY
40%
- 17 SAVILLS.COM
WORLD CITIES REVIEW
WHEN THE CITY IS NOT ENOUGH...
IN SOME CITIES LEISURE PROPERTIES ARE AN ESSENTIAL PART OF THE DEAL
ig cities have many attractions and may be the sole place of residence for half of the worlds population but many wealthy city enclaves are still empty at weekends. The tradition of spending the weekend in the countryside is well-established in many old world cities like New York, Paris, London and Moscow. It is likely that the CEO in our executive unit, who occupies a small apartment in Paris or Moscow during the week, would have a second home in the country. Those in Asian city states like Hong Kong and Singapore are more likely to travel to neighbouring countries such as Thailand, Malaysia and Indonesia to enjoy their second homes. For the Global Billionaire, meanwhile, a leisure home forms an integral part of overall accommodation needs. We have measured the leisure accommodation of both the CEO and global billionaire households in our World Class leisure properties index.
0
This index is an eclectic mix of Thai resort villas, Russian dachas, English country houses and French Riviera estates. Nevertheless, these residential properties can be seen as an important component of World Class city life. UNDER PERFORMANCE Leisure property has not seen the same level of performance as the main city residences. The leisure index increased by only 33% between December 2005 and June 2011, compared to 77% in the city index over the same period. This reflects the singularity of the World Class
Leisure property is a discretionary purchase and was one of the rst luxuries to go in the downturn
HOME FROM HOME
city and the way its residential markets have little to do with the domestic economy. Second homes nestled in a citys hinterland are more prone to the condition of the domestic, and even the rural economy, rather than the wealth being generated in the city state. It is not surprising then that World Class leisure property experienced the greatest growth during the global economic boom period in the years up to the end of 2007 but, as domestic economies suffered more in the global recession of 2008, leisure properties fell more averaging -12% compared to -6% in the city. Leisure property is a discretionary purchase and was one of the first luxuries to go in the downturn. Some of the countries of South East Asia where leisure properties are situated have not seen the same levels of value growth, hence the World Class leisure index has not received the same boost as the cities index. It has yet to return to its 2007 peak.
THE GLOBAL LEISURE VALUES INDEX
180
CITY PROPERTY LEISURE PROPERTY
160 140 120
INDEX
DEC 05
JUN 06
DEC 06
JUN 07
DEC 07
JUN 08
DEC 08
JUN 09
DEC 09
JUN 10
DEC 10
JUN 11
- 18 SAVILLS.COM
world cities review
ExPErT commENTarY
Hong kong london
savills agENTs arE aT THE HEarT of THE global ProPErTY marKET

Moscow MUMBAi new york
raymond lee savills Hong kong +852 2842 4518 rlee@savills.com.hk
Jonathan Hewlett savills london +44 (0) 20 7824 9018 jhewlett@savills.com
Alexander shatalov intermark savills +7 (495) 775 22 40 a.shatalov@ intermarksavills.ru
Jatin Patel savills india +91 9958 000 578 jkpatel@savills.com
elizabeth stribling stribling Associates +1 212 452 4400 estribling@stribling.com
Hong Kongs real estate is absorbing the wealth of the asia Pacific region
The world is using london as a safe haven store of wealth
closely linked to commodities markets, moscows real estate is a further play on the wealth created in the ciss main industries singAPore
mumbai is making the transition from a major national city to fully-fledged global city and its real estate prices reflect this sydney
New Yorks attractions, currently low prices and a favourable exchange rate, mean the city is poised to attract global HNWi tokyo
PAris
sHAngHAi
Jean claude caputo riviera estates +33 (0) 493 874 115 jc.caputo@ riviera-estates.net
Albert lau savills shanghai +(8621) 6391 6688 albert.lau@savills.com.cn
christopher Marriott savills singapore +65 6415 3888 cjmarriott@savills.asia
shayne Harris savills sydney +61 (0) 2 8215 8879 sharris@savills.com.au
chris Mancini savills tokyo +81 (0) 3 5562 1700 cmancini@savills.co.jp
Paris is rivalling london to attract buyers who seek old world stability
The creation of new wealth in china has made shanghai and its real estate a showpiece of the booming economy
High demand from overseas occupiers and limited space keeps rents and capital values high
a strong investment proposition with all the advantages of an old world city, in the booming asia Pacific region
Tokyo has joined the old world economies and its land offers a stable investment proposition
rEsEarcH coNTacTs
yolande Barnes savills residential research +44 (0) 20 7409 8899 ybarnes@savills.com
simon smith savills research & consultancy +852 2842 4573 ssmith@savills.com.hk
Paul tostevin ptostevin@savills.com rebecca gill rgill@savills.com sophie chick schick@savills.com
insights is published on behalf of savills (l&P) ltd by Blue door Media ltd, bluedoor-media.co.uk. All information correct at time of going to press. All rights reserved. Articles may not be reproduced without written permission from savills (l&P) ltd. while every care is taken in compiling the content, neither the publisher nor savills (l&P) ltd assumes responsibility for effects arising from this publication. Property Misdescriptions Act savills recommends applicants discuss their interest in a property with the negotiator who can answer your specific questions and advise if it is under offer. This is important if you are contemplating travelling some distance. All descriptions, dimensions, references to condition and permissions for use and occupation, and other details are given without responsibility, and any intending purchasers or tenants should not rely on them as statements of fact, but must satisfy themselves by inspection of the property. Investment advice The information and opinions contained in this magazine do not constitute professional advice and should not be relied upon. specific advice relating to your individual circumstances should be obtained.
- 19 savills.com
Residential markets in our World Class Cities have more in common with each other than the mainstream markets of the countries in which they operate

Worldclasscities 2011 Savilles

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INSIGHTS

World Cities Review

The 10 cities shaping global real estate

ST BASILS CATHEDRAL GATEWAY OF INDIA

COST OF BUYING RANKING

NEW YORK CITY

ILLUSTRATIONS ADAM POINTER

WORLD CITIES REVIEW

WORLD CITIES REVIEW

THE PERFORMANCE AND FUTURE PROSPECTS OF OUR WORLD CLASS CITIES

HOW THE TOP 10 WORLD PLAYERS COMPARE

COMPARING WORLDWIDE PROPERTY SIZES

ALL IN THE NUMBERS

3000 2500 2000

NEW YORK LONDON PARIS

CEO PROPERTY SIZE RANK AVERAGE SQ FT GIA* PER CEO HOUSEHOLD

12000 10000 8000 6000 4000 2000 0

SYDNEY SHANGHAI SINGAPORE MUMBAI TOKYO

SHANGHAI SINGAPORE MUMBAI

HONG KONG MOSCOW

WORLD CITIES REVIEW

MIDDLE AGED EX-PAT CEO

SENIOR LOCALLY EX-PAT EMPLOYED DIRECTOR DIRECTOR

RELATIVE COST OF BUYING

LOCALLY EMPLOYED ADMIN STAFF

250 200 150 100 50 0

TOTAL INDEX MOVEMENTS

HONK KONG MOSCOW PARIS

154% 143% 123% 98% 94% 49% 44% 32% 27% 7%

WORLD CITIES REVIEW

THE RENTAL DIVIDEND

EXPANDING OR RELOCATING? ACCURATE RENTAL COST RANKINGS ARE KEY

THE RELATIVE COST OF RENTING

HONG KONG TOKYO NEW YORK SINGAPORE

COST OF RENTAL GROWTH INDEX

RENTAL YIELD AVERAGE

TOTAL ANNUAL COST OF SEU RENTAL ACCOMMODATION

SYDNEY MOSCOW SHANGHAI MUMBAI

DEMAND AT THE TOP OF THE HONG KONG MARKET IS SETTING RECORDS

HONG KONG KEY FACTS

AVERAGE RENTAL YIELD

WORLD CITIES REVIEW

AVERAGE CAPITAL GROWTH

DEC 2005 DEC 2010

LONDON HONG KONG

WORLD CITIES REVIEW

A LONDON PROPERTY IS STILL VIEWED BY MANY AS SAFE STORE OF WEALTH

LONDON KEY FACTS

SAVILLS EXCUTIVE UNIT (SEU)

AVERAGE RENTAL YIELD

AVERAGE CAPITAL GROWTH

DEC 2005 DEC 2010

VALUING LAND OVER BUILDINGS MAKES TOKYO A UNIQUE MARKET

SAVILLS EXCUTIVE UNIT (SEU)

AVERAGE RENTAL YIELD

WORLD CITIES REVIEW

AVERAGE CAPITAL GROWTH

DEC 2005 DEC 2010

WORLD CITIES REVIEW

THE CITY WITH THE WORLDS HIGHEST CONCENTRATION OF MILLIONAIRES

SAVILLS EXCUTIVE UNIT (SEU)

AVERAGE RENTAL YIELD