World cities do not operate in isolation but are interlinked and heavily influenced by macroeconomic, political and social trends. They are particularly responsive to global events because each of them has an active international real estate market.
Our data on the top tier of global centres dates back almost 10 years. During this time we have witnessed some dramatic shifts in global real estate markets against a turbulent economic and geo-political backdrop.
We saw markets peak in many western cities during the credit-fuelled boom of the Noughties and subsequently plunge after 2008 as the global financial crisis took hold. Some recovered quickly when global uncertainty pushed investors towards stable world cities, where prime real estate was seen as a safe haven commodity.
A few didn’t suffer any falls in the first place as their domestic economies continued to boom. In the ‘old world’, where domestic housing markets were particularly hard hit, some cities, most notably London and New York, held up better and outperformed their country’s domestic markets in the early recovery phase. The other big story from the past decade has been the rise – and cooling – of Asia.
The most globally significant cities in the region, namely Hong Kong, Singapore and Shanghai, experienced a huge property boom, fuelled by rapid wealth generation, particularly from mainland China, at rates never seen before.
The rising moneyed class sought out real estate as a repository for its new-found wealth, driving some markets to record highs. Hong Kong was a major recipient of this mainland wealth and saw residential values double between 2008 and 2012.
Property market cooling measures, including additional stamp duties on foreign buyers, mortgage caps and restrictions on additional home ownership, have since slowed these former boom towns.
The rise of Asia has coincided with a global real estate sector shaped increasingly by private wealth. This wealth has driven the prime residential markets of top global cities and it has shaped the commercial sectors, too. Private buyers and funders stepped in at a time when traditional forms of bank lending were unavailable.
Private wealth (including privately funded property companies and REITs) is now the leading form of finance used in half of the world’s biggest property transactions – each worth at least US$10 million.
Our timeline below sets out some seminal events in the real estate markets of the top tier of global cities over recent years (click on fig. 13 to enlarge). It paints a picture of interlinked markets shaped by global forces – a trend that is set to continue.
We look at the future of the real estate markets in each of our 12 cities as we consider some of the factors that may be shaping them in the run-up to 2020.