Most Expensive Property Markets in 2009

Kathmandu, May 1

No surprise, Monte Carlo is number one in the Global Property Guide’s list of World’s Most Expensive Residential Real Estate Markets 2009, more than twice as expensive, at $45,000 per square metre.

Battling for the number 2 position are prime central Moscow and London. Prime central Moscow’s $20,853 per square metre price tag slightly outpaces core prime London’s US$20,756 per square metre, though it is fairer to say the two cities are neck-and-neck.

London residential property prices have fallen for much of 2008, while Moscow property price declines only started in the

Last quarter, allowing Moscow to catch up with London. Both countries have experienced strong currency declines. Tokyo and Hong Kong come in fourth and fifth, respectively.

New York, the only US city included in the survey, is sixth, with an average price of $15,000 per sq m.

Completing the top ten most expensive real estate markets are two European cities (Paris at seventh and Rome at ninth) and two other Asian cities (Singapore at eighth and Mumbai at 10th). Average prices range from $9,000 per sq m to $12,000 per sq m.

The figures are based on the average price of a 120 sq m, good-condition high-end used apartment in the city centres of more than 110 cities around the world, typically the economic centres where most foreigners are likely to buy. Data were collected during 2008. The US dollar exchange rate used is that of January 27, 2009.

For global bargain hunters, there are several places where property prices are relatively cheap —for example, parts of the Middle East, Latin America and Asia.

Cairo, Egypt, is one of the cheapest cities in the world, with prime city centre prices at around $600 per sq m.

Another Middle Eastern capital in the bottom 10 is Amman, Jordan, with average city centre prices at $1,150 per sq m.

Three Asian cities are included in the 10 cheapest, all located in rapidly growing and heavily populated countries, Bangalore in India, Chengdu in China and Jakarta in Indonesia. Chengdu, damaged during the magnitude eight earthquake in 2008, remains a vital economic, transportation and communication hub in the heartland of China.

Indonesia was the last country to recover from the 1997 Asian Financial Crisis. However, the economic reforms implemented by the Yudhoyono administration are setting the stage for steady economic growth.

Five Latin American cities complete the list of 10 cheapest cities for property buyers: Concepcion and Santiago in Chile, Quito in Ecuador, Managua in Ecuador and Lima in Peru. The same countries also tend to earn good rental yields.

Rental yields are generally below five per cent in most European cities, suggesting that property is still overvalued.

Rental yields are generally below four per cent in the following cities: Munich, Barcelona, Vilnius, Helsinki, Madrid, Rome, and Nicosia. Rental yields in Europe are lowest on Andorra at 2.2 per cent and Athens at 2.7 per cent.

Rental yields are between four per cent and five per cent in major cities such as Brussels, Tokyo, Berlin, Moscow, Copenhagen, Warsaw, New York, Shanghai, Paris, London and Geneva. Returns from rental investments are also relatively low in key Asian cities such as Singapore and Hong Kong and in almost all Indian cities — Bangalore, New Delhi, and Mumbai.

Only six cities have rental yields of more than 10 per cent, led by Chisinau with an average gross rental return of 14 per cent. The Moldovan capital is followed by Cairo, Jakarta, Manila, Skopje and Lima.

High returns can also be expected in Latin American cities. Yields range from eight per cent to 10 per cent in: Panama City, Panama; Bogota, Colombia; Managua, Nicaragua; Santiago, Chile; Buenos Aires, Argentina; and Quito, Ecuador. Rental yields in Kuala Lumpur, Malaysia and Amman, Jordan are also typically above nine per cent.

The recent house price boom and bust defeats the traditional notion that real estate prices are based primarily on local conditions.

The relatively low cost and ease of moving capital around the world has made it easier for people to invest in real estate markets in several countries. This is complemented by the relatively lower cost of international air transport. Several countries have also removed foreign ownership restrictions, a move encouraged by the Organisation for Economic Cooperation and Development (OECD) and the European Union.

The result of these changes has been a remarkable increase in cross country real estate investments-helping make the boom, and the bust, truly global.