Savills Prime Index: World Cities
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World Research – January 2021
S P OT L I G H T
Savills Prime Index:
Savills Research
World Cities
Prime residential prices ● Rental values and yields ● Global cities outlook
Global Overview Global Overview
2020 was a year
overshadowed by
the significant impact
Covid-19 has had on
A year of change
so many aspects of Prime residential markets show resilience amid
people’s lives. Work Covid-19 headwinds
and lifestyle habits
have had to adapt
The resilience of prime residential markets Bolstered by stimulus measures, low interest
because of the
Covid-19 pandemic, was highlighted over the second half of 2020. rates and demand for properties with more
disrupting global real Savills World Cities Prime Residential Index space, many residential markets experienced
estate markets. Prime recorded an average capital value increase of a robust recovery in demand.
residential markets 0.8% for the cities in the index at a time when Some of the strongest performers over the
have not been immune global GDP is recovering from the impact of last year were cities where effective
to this disruption, but Covid-19 and subsequent lockdowns. management of the virus allowed economic
have so far proven one The positive capital value growth recorded activity to be comparatively less impacted in
of the more resilient in the second half of 2020 was large enough to the past year, such as Seoul, Hangzhou and
real estate sectors.
more than offset the 0.3% decline seen in the Berlin. Supply and demand dynamics, however,
Savills World Cities
first half of the year. Leaving annual growth at also remained an ever-important driver.
Prime Residential
+0.5% for 2020.
Index tracks the
performance of 30 This turnaround coincided with activity Rental values and yields
global cities. It returning to residential markets around the The prime rental market on average fared
illustrates what the world as lockdown measures were loosened. worse during 2020 compared with the Global city: Hangzhou
pandemic has meant
for prime residential
values and rents in
2020. Average prime purchaser market. Demand for prime
price growth remained Average half year prime capital value and rental growth
Unlike the global financial crisis, this recession
residential rental properties is often more
positive for the cities
international and from corporate tenants.
is not rooted in the banking sector
in the index and we Capital values Rents
Travel restrictions have hindered these sources
expect this growth to 8.0%
of demand. A fall in tourism has also led to
improve in 2021. As
positive news of many rental properties that were previously on
the short-let market added to supply.
Looking ahead
vaccine rollouts begins
in many countries, we 6.0% Prime rents in the second half of 2020 fell The attractiveness of the prime residential
also look to where we 1% on average for the cities in the index. This sector across the globe will remain strong
expect the strongest followed a 1.5% decline seen in the first half of
performers to be for the year, leaving total annual prime rental Entering 2021, much still remains time, also make the sector attractive
Half year index change
4.0%
the coming year. growth down 2.5%. Yields have, however, held uncertain. Sentiment is, however, for wealth preservation. These factors,
improving as the rollout of the and the sector’s strong fundamentals,
relatively steady. The average gross yield for
Covid-19 vaccines begins. Despite mean positive price growth is expected
the index stood at 3.1% as of December 2020, the uncertainties that still linger, the
2.0% in 19 cities in 2021, compared with nine
down marginally from 3.2% a year prior. market for prime residential property is that are expected to see small price falls.
expected to remain active. Prime rental growth potential is likely
Modest impact compared Our prime residential forecasts for the to remain limited for many cities while
0.0% 30 cities in Savills World Cities Prime travel restrictions are still in place. But
to previous recession
Residential Index highlight the stability with the rollout of multiple vaccines,
The impact of the pandemic on prime
of prime residential property. Average a resumption of international mobility
residential prices has, so far, been modest in capital value growth for the cities in the could occur in the not too distant future.
-2.0% comparison to the global financial crisis (see index is forecast at 1.6% for 2021. This could help once again drive rental
Jelena Cvjetkovic chart to left). Unlike the global financial crisis, Many of the factors which helped growth and hence yield potential.
drive prime residential markets in the The long-term implications of
Director, this recession is not rooted in the banking
second half of 2020 are expected to Covid-19, and what this means for
Global Residential -4.0% sector. Current distress levels are much lower
continue to do so through 2021. These the way in which people live and work,
+44 (0)20 7016 3754 than compared with the previous downturn. include the desire for more space and are still uncertain. That said, the
jcvjetkovic@savills.com Interest rates remain at record lows. Higher- low levels of supply in some locations. attractiveness of the prime residential
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earning professionals have also been less Historically low interest rates, which sector is likely to remain strong in 2021
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are expected to remain low for some and beyond.
Source Savills Research susceptible to income disruption to date.
2 3
Growth Forecasts Growth Forecasts
Key
Global cities outlook
Europe +8% or higher
In Europe, Berlin is forecast to see the strongest price
growth in the region in 2021. The German capital is
+4% to 7.9%
expected to continue on an upward trajectory with
high levels of demand that exceed supply. London’s
The average prime residential price growth for the cities prime market is expected to see a turn around, with
>0% to 3.9%
in the index is forecast at 1.6% for 2021, against the +0.5% forecast growth underpinned by the value on offer
0%
seen in 2020. This growth varies by city compared to its peak in 2014.
Of the European cities in the index expected to see
price falls over the coming year, none are forecast to
Prime Capital Values Prime Capital Values
HANGZHOU SAN FRANCISCO CA
Prime capital values - Top HANGZHOU
5 world cities SAN FRANCISCO CAPE TOWN
1. Hong Kong 2. New York 3. Tokyo 4. Geneva 5.Shanghai
Price growth returns ROME NEW YORK ROME
HONG
Prime KONG
capital
(US$ psf)
$4,460
value
GENEVA
NEW
Prime YORK
capital
(US$ psf)
$2,500
value
HONG KONG
TOKYO
PrimeMUMBAI
capital value
(US$ psf)
$2,300
SINGAPORE
GENEVA
PrimeLONDON
capital value
(US$ psf)
$2,150
Prime
TOKYO
SHANGHAI
capital value
(US$ psf)
$1,960
S
Price growth sees variation across cities with different factors at play Global city: Amsterdam Prime capital value Prime capital value Prime capital value Prime capital value Prime capital value
(€ psm) (€ psm) (€ psm) (€ psm) (€ psm)
€39,600 €22,200 €20,400 €19,100 €17,400
A little under two-thirds (64%) of cities saw rates. Economic activity in South Korea Chinese cities in the index, helped by
Source Savills Research
prices increase in the second half of the year, was also comparatively less impacted by talent attraction programmes and a vibrant
as activity increased in many locations. This the pandemic in 2020, as the country tech environment.
compares to 39% that saw rises in the first avoided severe lockdown measures. Mumbai, meanwhile, saw the largest Lisbon saw the largest price falls in 2020 Prime capital values around the world
half of the year. Cities in China also saw strong price price fall over the year. The prime market of the European cities in the index. Travel
Prime capital value Prime capital value
performance over the past year. China in the Indian city continued to grapple with restrictions hindered the market here, City
December 2020 (US$ psf) December 2020 (€ psm)
Mixed growth in Asia saw a comparatively strong economic oversupply while the country was badly which is driven by international buyers. HANGZHOU SAN FRANCISCO CAPE TOWN
Hong Kong $4,460 €39,600
Seoul was the strongest performer for prime performance in 2020. The country’s impacted by the virus. Price declines, Tourism is also an important driver for the
New York $2,500 €22,200
residential price growth in 2020. The GDP increased by 2% in 2020 compared with however, slowed in the second half of the local economy.
Tokyo $2,300 €20,400
residential market in the South Korean a 4% contraction for global GDP, according year as stamp-duty reductions were
Geneva $2,150 €19,100
capital has been on an upward trend due to to Oxford Economics. Hangzhou saw the introduced in September. Improvement in US
scarce supply and historically low interest strongest price performance out of the Hong Kong also saw one of the largest price Prime price performance for all the US Shanghai $1,960 €17,400
falls in 2020. Prime values in Hong Kong cities in the index improved in the second London $1,920 €17,000
have been moving downwards since their half of the year compared with the first half. Sydney $1,790 €15,900
June 2019 peak as the market adjusts to a Factors such as loosening Covid-19 Paris $1,760 €15,600
Prime capital value growth to December 2020
changing political landscape in the city. restrictions, attractive interest rates and a Seoul $1,760 €15,600
■ 6 months ■ 1 year Price falls stabilised in the second half of the strong stock market gave the prime market Shenzhen $1,630 €14,500
10.0%
year, as the recent decline in prices attracted a boost over this period. Beijing $1,560 €13,900
some buyers looking to benefit from the Los Angeles saw the strongest growth San Francisco
GENEVA TOKYO
$1,540 SINGAPORE
€13,700
8.0%
better value on offer. through the year, followed by Miami. Both Singapore $1,530 €13,600
6.0% cities saw strong activity in the second half Milan $1,530 €13,500
Supply impacts Europe of the year driven by demand for detached Rome $1,450 €12,900
Despite the impact of the pandemic, homes. Prime values in San Francisco
Price Index Change
4.0% Los Angeles $1,330 €11,800
supply and demand dynamics remained remained slightly up for the year, as supply
Guangzhou $1,260 €11,100
2.0% an important driver for prime residential levels in the city remain low. New York was
Moscow $1,200 €10,600
values. Many cities where supply levels slightly down for the year, as the prime
Berlin $1,140 €10,200
0.0% are low continued to see positive price market here faces existing oversupply.
Mumbai $1,140 €10,100
growth. This was the case for a number
-2.0% of European cities, including Berlin, Price falls seen elsewhere Hangzhou $1,110 €9,890
Amsterdam and Paris. Elsewhere, Cape Town and Dubai also saw Amsterdam $1,050 €9,330
-4.0% Miami $970 €8,610
Prime prices in London remained f lat prime values decline over the past year.
over 2020. Activity in the prime residential Cape Town’s market was already adjusting Lisbon $950 €8,390
-6.0%
market picked up when the housing market to a weaker economic environment prior to Bangkok $870 €7,750
reopened in May, fuelled by those looking the pandemic. Meanwhile, Dubai’s market Madrid $770 €6,850
-8.0%
for more space in all locations. There has has been inhibited by oversupply in recent Barcelona $720 €6,410
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remained a core of underlying demand, years. Dubai is a highly international market
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but restrictions on international travel with a large expat population. Price falls
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Cape Town $290 €2,530
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dampened the ability for overseas buyers slowed in the second half of the year,
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Kuala Lumpur $280 €2,460
Source Savills Research to purchase. however, helped by high demand for villas. Source Savills Research
6 7BERLIN AMSTERDAM LOS ANGELES Prime Rental Values Prime Rental Values
Seoul witnessed the strongest
prime rental growth of the cities
in the index in 2020 Prime Rental Values - Top 5 cities
BEIJING
Weekly rent comparison December
HANGZHOU 2020 SAN FRANCISCO CAPE TOWN
GUANGZHOU SHENZEN SEOUL
Period of adjustment
1. New York 2. Hong Kong 3. Tokyo 4. Los Angeles 5. Paris
Prime rental growth has on average performed worse than price growth,
hindered by travel restrictions and lower demand in urban centres
SYDNEY MIAMI MOSCOW
Just 31% of cities saw positive rental pandemic. Some European markets travel restrictions. Both cities, however,
growth in the second half of 2020. have felt the impact of rising rental saw a larger fall in rents in the first half
An increase, however, from the 19% supply levels as properties previously of the year following the initial impact ROME GENEVA
HONG
BERLIN KONG TOKYO
AMSTERDAM SINGAPORE
LOS ANGELES PARIS
ROME NEWNEW
YORK YORK HONG KONG
Weekly rent (US$ psf) Weekly rent (US$ psf) Weekly rent (US$ psf) Weekly rent (US$ psf) Weekly rent (US$ psf)
that saw rent rises in the first half. let on the short-term market have added of the pandemic.
$1.87 $1.69 $1.41 $1.13 $1.03
to supply. This led to rent declines in Economic activity in China largely
Weekly rent (€ psm) Weekly rent (€ psm) Weekly rent (€ psm) Weekly rent (€ psm) Weekly rent (€ psm)
Reduced travel impacts Paris, Madrid and Barcelona over the returned to normal in the second half
€16.57 €14.99 €12.50 €10.02 €9.17
some European cities past year. of the year. Travel restrictions remain
Reduced mobility has dampened prime An increase in supply, from both in place, which has greatly reduced Source Savills Research
rental values in cities around the world, short-lets and completing new build international arrivals and stifled
including many in Europe. Amsterdam stock, also impacted prime rents in demand in the rental market. Prime
and Berlin, however, proved resilient London. The UK capital saw the largest rental growth has, therefore, remained
with prime rents increasing over the rent declines of the European cities in below price growth. becoming harder to find as landlords wish Where do rents currently stand?
past year. Both cities have limited the index through 2020. Seoul remains an exception, with to move to regular rental contracts due to Weekly rent comparison December 2020
supply. Berlin’s rental regulation has the strongest prime rental growth of the low interest rates. New York $1.87 / €16.57
also further reduced the supply of rental Rental falls in Asia Pacific, the cities in the index in 2020.
GUANGZHOU Hong Kong SHENZEN SEOUL MADRID
$1.69 / €14.99
properties as landlords increasingly but Seoul bucks the trend Historically low interest rates combined Desire for space drives
Tokyo $1.41 / €12.50
move rental apartments onto the sales Hong Kong saw the largest prime rent with South Korea’s unique Jeonse US city rental growth
Los Angeles $1.13 / €10.02
market. This has left availability on the declines of the Asia Pacific cities in the system, where tenants pay the landlord As seen in many Western markets, the
Paris $1.03 / €9.17
rental market at record lows. index in 2020, followed by Sydney. a refundable deposit equivalent of desire for space was seen to have an
Tourism is an important driver for Prime rents in both cities have been 70-80% of the property value, make the impact on the rental market in the US. Moscow $1.03 / €9.12
many European city markets, an badly impacted by lower international rental market more attractive for As many people opted to move away from London $0.97 / €8.59
industry which has been hard hit by the and corporate demand as a result of tenants. Jeonse listings are now densely populated areas over the past Seoul $0.89 / €7.88
year, the cities in the index where space Amsterdam $0.79 / €7.05
is on offer have performed better. San Francisco $0.77 / €6.83
Los Angeles and Miami both
Prime rental value growth to December 2020 Rome $0.77 / €6.82
maintained positive rental growth as a
■ 6 months ■ 1 year Bangkok $0.73 / €6.48
result of this search for more space. The
8.0% Singapore $0.72 / €6.36
more densely populated San Francisco, SYDNEY MIAMI MOSCOW
meanwhile, experienced small rent falls. Milan $0.68 / €5.99
6.0%
New York experienced the largest decline, Miami $0.64 / €5.65
4.0% as an apartment-orientated market with Berlin $0.61 / €5.40
Rental Index Change
higher levels of supply. Mumbai $0.58 / €5.12
2.0%
Sydney $0.56 / €4.96
0.0% Supply and demand $0.54 / €4.78
Shenzhen
dynamics take a toll
Shanghai $0.53 / €4.75
-2.0% Cape Town experienced the largest
fall in prime rental values out of the Beijing $0.51 / €4.54
-4.0%
cities in the index over the past year. Barcelona $0.46 / €4.13
-6.0% As a fall in tourism has led to a rise in Dubai $0.45 / €3.98
supply of properties previously let on Madrid $0.43 / €3.80
-8.0% the short-let market. Hangzhou $0.32 / €2.81
In Dubai, existing oversupply continued $0.31 / €2.71
-10.0% Guangzhou
to have an impact on prime rental values.
Cape Town $0.21 / €1.88
Rent declines, however, slowed in the
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Source Savills Research Source Savills Research
8 9Yields Costs of Ownership
Hong Kong retains its top slot
as the most expensive city for
both purchase price and the
associated costs
ROME NEW YORK HONG KONG
Buy. Hold. Sell.
For those looking to purchase a property abroad,
the associated costs are often a key consideration
The associated costs with buying, owning and Hong Kong, meanwhile, remains the
selling a property can influence buyer decisions. most expensive city in the World Cities
Property taxes are also often used as a tool by Index for both the purchase price and the
governments to influence residential markets. associated costs for an overseas buyer. On
Since the pandemic, we have seen tax reductions the other hand, Shenzhen has the cheapest
What has
be used as a tool to drive growth in residential associated costs but has the tenth most
markets such as London and Mumbai. expensive purchase price.
happened to yields?
Buying, owning and selling a US$2 million property
■ Cost of buying ■ Cost of holding ■ Cost of selling
Hong Kong
Singapore
Average prime residential gross yields across our prime cities stand at 3.1% Cape Town
as of December 2020, slightly down from 3.2% at the same point the year prior Global city: New York
Barcelona
Mumbai (From April)
Lisbon
Sydney
Average prime price growth for the index however, been modest meaning we have urban living fell out of favour as a result of to lower rental values in order to keep Mumbai
outpaced rental value growth in 2020. As not seen a significant shift in average the pandemic and this has impacted New their property occupied. New York
factors such as lower corporate demand, residential yields. York’s residential market. Rental values Moscow saw the largest shift of the Tokyo
rising supply from short-lets, and a move New York experienced the largest yield have, however, seen a larger fall over the European cities in the index moving to Madrid
away from urban environments have shift of the cities in the index. The average past year. While owners may hold onto 4.8% in December 2020 from 5.0% in Miami
impacted prime rental growth in many yield here stood at 4.2% in December 2020, their properties during a crisis if they do not December 2019. Unlike the purchaser Berlin
cities. The outperformance of prices has, compared with 4.5% a year prior. Dense need to sell, landlords are more likely market, international and corporate San Francisco
tenants drive the prime rental market London (From April)
in the Russian capital. In Asia Pacific, Paris
Bangkok saw the largest change over the Amsterdam
Average yields by city: December 2020 vs December 2019 same period, falling to 4.3% from 4.6%. Los Angeles
The prime rental market in the Thai Bangkok
Dec-20
Dec-20 Dec-19
Dec-19
6.0% London
capital has a high level of supply, while
Rome
demand is predominantly driven by
Milan
5.0% international tenants.
Kuala Lumpur
Average gross prime yield
Dubai
4.0%
New to the index in 2021 Shanghai
Geneva
3.0% Beijing
Rome
Hangzhou
The historic
Moscow
2.0% capital of
Guangzhou
Italy and a
major tourist Shenzhen
1.0%
destination
0% 5% 10% 15% 20% 25% 30% 35%
ROME NEW YORK HONG KONG
Percentage of property price ($2m)
0%
Source Savills Research
Milan
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Italy’s leading
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Note: Our scenario assumes a non-resident overseas buyer purchasing a $2 million property (which in the UK
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equates to £1.5 million). This is for use as a second home for less than nine months of the year over a five-year hold.
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No capital growth has been applied, avoiding the complication of having to forecast that for each city. London
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fashion centre
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(April) buying costs include the SDLT increase which takes effect 1 April 2021 and assumes the current SDLT holiday
Source Savills Research ends on 31 March 2021. Mumbai (April) assumes the current stamp duty reduction ends on 31 March 2021.
Note: Rome and Milan are new additions to the index and therefore historical data is not available
BEIJING MILAN BARCELONA
10 11Savills Research
We’re a dedicated team with an unrivalled reputation for producing well-informed and accurate analysis,
research and commentary across all sectors.
Research Global Residential
Sophie Chick Sean Hyett Justin Marking Hugo Thistlethwayte Jelena Cvjetkovic
Director Analyst Head of Global Head of Global Director
World Research World Research Residential Residential Operations Global Residential
+44 (0)20 7535 3336 +44 (0)20 7409 8017 +44 (0)20 7499 8644 +44 (0)20 7409 8876 +44 (0)20 7016 3754
sophie.chick@savills.com sean.hyett@savills.com jmarking@savills.com hthistlethwayte@savills.com jcvjetkovic@savills.com
Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, UK, Europe,
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