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Where should you buy a house?

Where to buy

Savvy speculators should snap up property in Tokyo or Berlin

Savvy speculators should snap up property in Tokyo or Berlin

James Tozer | June/July 2016

Buying property can be a lottery. You might covet a second home below the Eiffel Tower or the Swiss Alps. But data from Knight Frank show that prime properties in Paris and Geneva – the top end of the market – have lost more than 5% of their value in nominal terms since 2013. It could be worse: prime prices in Singapore dropped by 18%.

Homeowners of London and New York have been more fortunate. Both cities are expensive – only Hong Kong and Monaco have higher prices per square metre – and are home to more high-net-worth individuals (with wealth greater than $10m) than anywhere else, as indicated by the size of their bubbles. Property in these areas has gained in value, even when adjusting for low inflation in Britain and America.

Buyers seeking more room for their money should look to the bottom of the chart. Prices in Istanbul and Moscow have been rising quickly. But savvy speculators can get similar value in Tokyo or Berlin, where the quality of life (illustrated by a colour scale from red to blue) is far better. They might avoid Mumbai, which came last of these 20 cities in the Economist Intelligence Unit’s Liveability Rankings.

The most liveable city was sunny Sydney, which has more high-net-worth individuals than Monaco, and whose prime prices have risen 27% since 2013. But a recent analysis in The Economist showed that Australia’s housing market is frothy: the ratio of property prices to incomes was 46% higher than the long-term average, suggesting that earnings will rise or homes will become cheaper. Housing in Singapore, however, was undervalued. As always with real estate, the next boom or bust could be just around the corner. ~ James Tozer

2 Readers' comments

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Editors - June 20th 2016

Dear Maui Observer, Thank you for your comment. To clarify, the prices here refer to "prime real estate", as is mentioned within the piece and on the chart, which is defined by Knight Frank as the top 5% of the market. 1843 editorial team

Maui Observer - June 5th 2016

Dear James and Matt, Thank you, very nice graph and write-up. However, the price per sq. m. that you show for Miami is way off. Per Zillow's actual sales data (http://www.zillow.com/miami-fl/home-values/), the average sale price per sq. ft. for Maiami is around $310, which is $3350 per square meter. The Miami prices have not been materially above this level since 2008, when they were around $4000 per square meter. Your graph, however, shows Miami price well above $10000 per square meter. I would probably check other cities as well, just to be sure.