Major Urban Centers Continue to Foster Commonalities Appealing to High Net Worth Individuals Across the Globe

New York

Having just returned from Madrid and Lisbon where we welcomed new Berkshire Hathaway HomeServices affiliates in those cities, I had an opportunity to discuss the impact of select neighborhoods in key international capitals, and how those continue to appeal to high net worth individuals across the globe.

In Manhattan, the importance of the international buyer cannot be overstated, even in an environment of diminishing foreign purchases in the U.S.  The National Association of Realtors recently published their Profile of International Transactions in U.S. Residential Real Estate 2019 report. It cited a 37% decline across the U.S. in the dollar volume of purchases of non-resident foreign buyers over the same period the previous year. The international buyers though, still make up 15% of all real estate transactions in New York City.

There are many factors for the declining volume, from regulatory matters to unfavourable exchange rates, and much more. The matter is quite complex. Nonetheless, high net worth buyers and sellers from global capitals such as New York City and London, share key common denominators on what appeals to them, including the types of neighborhoods to which they are attracted.

Recent data from Berkshire Hathaway HomeServices Kay & Co. in London, and Berkshire Hathaway HomeServices New York Properties, revealed which neighborhoods attract specific buyers in London, and concurrently in New York City. High net worth individuals have long been attracted to key urban centers across the globe to invest in luxury property and now, new data shows the tale of two of these cities – New York City and London – taking into account property prices, lifestyle offerings, demographics and attractions.

There are roughly 34,000 British citizens living in New York City, with 54% of them residing in Manhattan*, while there are 63,920** U.S. citizens living in London. The similarities of both cities make for a very positive experience for both. For example, the public transportation in both are unrivalled. ‘Parallel’ attractions such as Tate Modern and MoMA; Big Ben and the Empire State Building; high-end shopping and spectacular green spaces such as Central Park and Hyde Park further the parallels.

These parallels can be drawn to cities such as Madrid, who also has an exemplary urban appeal. While Madrid’s famed El Retiro at 350 acres is less than half the size of Central Park, its surroundings are among the city’s most desirable. While only 8% of foreign buyers purchase a home or condo in excess of $1 million or more***, the dollar volume as a percentage of total sales those buyers represent to a market like New York or London, where the definition of a luxury residence now begins at $5 million, is compelling.

Again, while the percentage of buyers may be down, Berkshire Hathaway HomeServices Kay & Co. in London reports, that on the buying side 24% of their buyers of residences priced over £10m ($12.9m) are now U.S. based. In previous years, they report that number being in single figures. The appeal? Value. There is great value in London, with many expecting a bounce in as the UK works through Brexit.

In New York City, numerous factors have created downward pressure on sales during 2019, but as we enter 2020 and prices begin to adjust, we anticipate growing opportunities in the high-end market.

Global Perspective a Must

According to Statista, an online statistics and market research portal, the high net worth individual (HNWI), owns an average of 3.63 homes, many in a variety of locations. These individuals are crucial to the international residential real estate market, and their perspective on buying is truly unique because there is such variety for pricing in major global cities.

For example, let’s look at London again, which according to the Profile of International Transactions in U.S. Residential Real Estate 2019 report was the most expensive city in the world at the time of the 2019 report, at $29,680 per square meter ($2,757 per square ft).  In comparison, New York City, which was third on the list at $17,190 per square meter ($1,597 per square ft), was a relative bargain. Or Dubai, who was 18th on the list at $5,920 per square meter ($550 per square foot), was definitely a bargain!

Because Monaco is an independent city-state, it did not appear in the report noting specific cities. However, Monaco is definitely the most expensive real estate in the world, at an average price of $54,409 per square meter ($4,560 per square foot), twice the price as London and Hong Kong.

Below are the top 15 most expensive markets in the global residential real estate market as per that report, noting that Monaco is a stand-alone as a city-state. The NAR report notes the pricing is based on a 120-square-meter apartment in the center of a premier city.

  1. Monaco – $54,409 per square meter ****
  2. UK, London — $29,680 per square meter
  3. Hong Kong, Hong Kong Island — $28,570 per square meter
  4. US, New York — $17,190 per square meter
  5. Israel, Tel Aviv — $17,150 per square meter
  6. Japan, Tokyo — $16,320 per square meter
  7. France, Paris — $15,870 per square meter
  8. Russia, Moscow — $14,710 per square meter
  9. Switzerland, Geneva — $14,230 per square meter
  10. Singapore — $13,750 per square meter
  11. China, Shanghai — $11,830 per square meter
  12. India, Mumbai — $10,930 per square meter
  13. Australia, Sydney — $10,710 per square meter
  14. Canada, Toronto — $10,660 per square meter
  15. Taiwan, Taipei — $10,370 per square meter
  16. Italy, Rome — $8,170 per square meter

Lastly, it is also important to note that every market has ‘trophy’ properties that are exceedingly above the average per square meter cost. So again, it’s all a matter of perspective.

References:

* https://transferwise.com/us/blog/a-study-of-brits-living-in-new-york-city

** https://en.wikipedia.org/wiki/Demography_of_London

*** Profile of International Transactions in U.S. Residential Real Estate 2019 report

****Monaco not noted in the report but broadly touted as world’s most expensive residential real estate

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