The residential sectors of our 12 global cities are shaped by a variety of factors. The value of mainstream residential real estate is more likely to be determined by the domestic economy, while prime property is more aligned to international forces.
International businesses operating in world cities compete for a global pool of talent. For those looking to hold on to the best staff over the long term, the costs associated with purchasing or renting residential accommodation become highly relevant – as does the quality of life available in a city.
Often a city will be as much an attractor of human capital as the company itself.
The number, choice and characteristics of residential neighbourhoods, accessibility to work, and the cost and affordability of accommodation will all play a part in an organisation’s ability to attract staff. The price of residential accommodation will also help to determine the size of salaries and allowances needed to retain that talent.
The first chart on the opposite page shows the average values for the homes occupied by different household members of the SEU on a square foot basis (click on fig. 8 to enlarge). The homes of the CEO and directors are considered ‘Prime’, while those of the administrative, ‘Mainstream’.
Our analysis highlights the difference between Hong Kong and ‘the rest’. Prime prices in Hong Kong, at just over $4,000psft, are four times those of Dubai and more than twice those of Singapore. Space, particularly prime space, is at such a premium in this high-rise city that units are particularly small and expensive. The pressure of Chinese money on the market has pushed prices to high levels in recent years – particularly in the prime markets. Although cooling measures have slowed the top end of the market recently, Hong Kong still hosts the world’s most expensive residential real estate.