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International Property: Battle of the Capitals - Europe

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International Property: Battle of the Capitals - Europe

By - Tuesday 17 April 2012

Right now around the world, many capital cities are markets-apart from the countries they represent, and even distanced from the world as a whole; like they have created a new world just for them. Ever since the US sub-prime crisis morphed into the international financial crisis and became the worst global economic time since World War II, cash has been a dangerous commodity to hold.

The wealthy have sought to solidify their assets (opposite of liquidation, see what I did there). This first triggered the gold rush, but as gold prices soared, property became the next target. Not just any property; property that can hold its value during this financial volatility.

This basically equates to prime properties in prime locations. This is because such properties are always bought by the wealthy, and because they do not need to drop prices for a quick sale when things go bad prices rarely fall, and because the property is sought after it tends to grow in price much more quickly when times are good.

And times are certainly good in many capital cities right now, as wealthy buyers from emerging markets and around the world drive up prices even as the markets around them wither and stagnate. We thought it would be good to compare some of the hottest capital city property markets by continent.

Europe

London

Hot Stats:

  • Recovery Began: May 2009
  • Prices above pre-crash peak: Yes
  • Prime Property Price Growth since Recovery: 35%

Prime London property has always been known as a hot asset, which grows rapidly during up cycles and holds well during down cycles, so wealthy buyers seized on the opportunity presented by the weak Pound and initial price falls. London quickly became the most popular city in the world for wealthy buyers to put their cash into property, and the London property market was one of the first to turn around with prices growing again by May 2009. 

We can see the wealthy creating these prime pockets outside of reality in the Royal Borough of Kensington and Chelsea, which is one of the most sought after boroughs in London. Looking at Land Registry data we see that house prices have grown constantly, from £710,475 in May 2009 to £964,985 in February. The pre-crash peak was £843,835 in June 2008, and prices exceeded that in April 2010.

Paris

Hot Stats:

  • Recovery Began: 2010
  • Prices Above Pre Crash Peak: Unknown
  • Prime Property Price growth since Recovery: Approx 30%

The first thing to say is that finding data on average prices in Paris is much more difficult than it is for London, where the Land Registry lets you break it down 9 ways from Sunday. However, from a number of different sources and reports we can ascertain that Paris property prices have been growing strongly since 2010, much more strongly than the rest of France.

A report from the National Association of Real Estate Agents in France (FNAIM) tells us that prices in St Germain des Pres, which is the most expensive area of Paris, grew by around 20% in 2010. Data from Le Chambre des Notaires de Paris showing that prices in Ile de France (Paris and surrounding) grew 10% in 2011. However, data the National Institute for Statistical and Economic Studies gives us year on year growth on a quarterly basis for Paris as follows: 20% in Q1, 22.1% in Q2, 19.3% in Q3 and 14.7% in Q4. Then, if you take off the quarterly growth of 5.6% it gives us for Q1, we can make the year-end figure 9.1%, giving us 29.1% for the 2 years since the recovery began.

Moscow

Hot Stats:

  • Recovery Began: 2010
  • Prices Above Pre Crash Peak: Yes
  • Prime Property Price growth since Recovery: 10%-15%

We have Knight Frank to thank for all the data on Moscow, although it is a little hard to put together. From its specialist Moscow luxury report we learn that prime property prices  in Moscow crossed the pre-crash threshold with a 10.7% growth in Q1 2011. We learn from the Wealth Report 2010 and 2011 that the recovery began with a 1% growth in 2010 following a 6.3% contraction in 2009. And from the wealth report 2012 coupled with the Prime Global Cities index, – which started collecting data on prime cities in Q1 2011 – we learn that growth accelerated in 2011 to finish the year with a growth of 9.8%.

Others:

We can see from the wealth of reports that the three capitals above are certainly the three hottest in Europe in terms of this new super-prime phenomena. Many of the other hot markets aren't capitals, Monaco and Cote d'Azur, while Vienna and Kiev are also seeing strong prime growth at the lower end of the pricing spectrum.

And the Winner Is: London

In Europe, the winner is as it was always going to be: London. It is the number one city in the world for wealthy people to invest in prime property; we have the schools, the prestige, the Euro-free economy, the stability and the safety of investment. Property holds its value during down cycles, and is among the fastest rising in the world during up cycles.

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.


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