_The Global Ultra-Prime Report 2019: Super prime city markets performance

Transaction volumes grew by 13% in the year to 2017. The growth in activity looks set to continue. In the first eight months of 2018 our group of six top-tier city markets saw 116 transactions, worth a combined $5.1 billion.

Over the most recent full three year period, London and Hong Kong both led with an average annual value of transactions in the ultra-prime segment totaling $2.1 billion, New York follows with $1.5 billion.

Looking at the most recent 12-months period, to the end of August 2018, the results are: Hong Kong on top with 47 transactions, followed by New York with 39 and London with 38. In terms of total value, Hong Kong again leads with a combined $2.5 billion, followed by New York and London both with $1.5 billion.

When looking at the average value of transactions in the most recent 12-months period, to the end of August 2018, Hong Kong again leads this measure at $52.8 million, followed by Singapore at $44.1 million and Sydney with $43.8 million.

Over the next few pages we pin-point the most sought after areas in each of our top city markets, using our unique ultra-prime sales data to confirm where transactions have taken place in the three years to August 2018.

London

London’s reputation as one of the world’s leading ultra-prime markets is supported by its global appeal, the dominance of its business and financial services cluster and its convenient geographical location. This prominence was reflected in the Knight Frank City Wealth Index, as published in The Wealth Report 2018.

In 2015, transaction volumes above $25 million were almost double the number seen in any other location. This position has changed in recent years as higher stamp duty charges and concerns over Brexit have reduced the number of sales in London, while other markets have seen their sales increase.

Notwithstanding this relative decline, London’s average annual transactions over the most recent full three year period, at 48 is higher than that of New York and Hong Kong with 40 and 38 respectively.

The traditional ultra-prime markets in Belgravia, Mayfair and Knightsbridge attract the most activity, with these areas alone accounting for 62% of transactions in 2017.

The most common property type being sold are houses, which account for, on average, 54% of transactions. The average price for ultra-prime sales was $42.5 million over the most recent full three year period, the second most expensive location behind Hong Kong.

With New York topping the Knight Frank City Wealth Index, its positon as one of the largest markets for $25 million plus sales is not surprising. This index ranks cities based on their population of wealthy individuals, property investment, lifestyle elements and future potential wealth creation, with New York topping all measures.

The high-end market here increased by 50% between 2015 and 2017, with 42 transactions, and this pace has continued with the 12 months to August 2018 witnessing 39.

Over a third of transactions occur in Downtown with a further 33% in Midtown. The Upper East Side, which includes 5th Avenue, accounts for 22%. The predominant property type is unsurprisingly apartments, covering 85% of transactions.

Hong Kong

Hong Kong leads as the most expensive global ultra-prime market, with an average price paid over the past three years equating to $54 million.

In the 12 months to August 2018, Hong Kong was home to 47 transactions - the highest of any city. Hong Kong attracts a large number of expatriates to live and work due to its status as an international financial centre.

With attractive education options, low taxation and an established and strong legal system, as well as a relatively stable political environment – the city offers an attractive environment for wealthy individuals.

Investment in residential property is attractive due to relatively low property taxation, no capital gains tax and no inheritance tax.

Most properties that have transacted above $25 million are larger houses in luxury areas such as The Peak, most notably Mount Nicholson, or in Island South.

Properties here have views of Victoria Harbour as well as benefiting from garden space, swimming pools, and many with gym and spa facilities. The largest buyers in this segment are local, yet there is a notable presence of Chinese Mainland buyers.

Los Angeles

Los Angeles has seen significant growth in its ultra-prime market. In 2015 there were five transactions recorded above $25 million, growing to 18 in 2017. This total excludes transactions in Malibu which we discuss later.

Over the three years studied, the top destination within Los Angeles has switched between the sub-markets of the city of Los Angeles itself and Beverly Hills.

Los Angeles’ prominence in this market segment is unsurprising as the city ranked second in the “wealth category” in the 2018 Knight Frank City Wealth Index.

Sydney

Almost all of Sydney’s ultra-prime transactions over the past three years occurred in the Eastern Suburbs of Sydney and all were for houses.

Whilst Sydney is one of the smallest city markets in regard to transaction levels, it has some of the most spacious properties with the typical transaction encompassing plots of land, and an average saleable area of 1,976 sq m.

Not only do the properties cover large areas, but the majority have waterfront views and a private swimming pool.

Singapore 

Singapore is undoubtedly an ultra-prime market – although it sees the smallest number of transaction numbers compared to our other city markets.

This is partly due to the raft of cooling measures introduced in the wake of the Global Financial Crisis. The number of sales above $25 million cooled to just two in 2016, but has since recovered with five in 2017 and 11 in the first eight months of 2018 demonstrating the underlying health of this market.

Transactions at this price level are mainly to be found close to Orchard Road, with proximity to this being the key defining factor. Properties transacting at the top-end of the market tend to be large houses or bungalows with additional amenities such as a swimming pool, large gardens. There have been a handful of apartments in this space, but only large penthouses are likely to achieve this price point.

Other city markets

Miami and Paris also feature in our city markets for this market segment, yet transaction numbers recorded here are generally lower than the numbers seen in the cities we showcase above.

These are growing markets and ones in which we expect to see a growth in transaction volumes over the next few years. The prime market in Paris is being aided by strong house price growth inthe past two years totalling 18%.

The types of properties covered varies widely, with many in Miami being penthouses in residential developments whereas in Paris, the typical transaction involves houses with gardens in the 6th and 7th Arondissements.

While there have been a very limited number of sales above the $25 million mark in Dubai, this is not an indication of a lack of ultraprime schemes. In fact, there are a number of schemes where the quality matches, or in some cases, surpasses what is found in those priced at $25 million and above, in other key global cities.

Knight Frank has seen strong demand for properties in this segment of the market, with the benefit that in Dubai, buyers are able to acquire these ultra-prime projects at values that are relatively lower, compared to other key global cities, whilst still benefitting from Dubai’s business and lifestyle offer.

Future locations

Knight Frank’s Wealth Report 2018 highlights that the global ultra-wealthy population ($50 million in net assets or more), grew by 18% in the five years up to 2017 and is forecast to increase a further 40% between 2017 and 2022.

This growth in global wealth is likely to mean that transactions at the very top-end of the market will continue to increase and spread to more locations that we haven’t highlighted over the previous nine pages.

Taking some of the key findings from the Knight Frank City Wealth Index 2018 other cities such as San Francisco, Chicago, Dallas, Beijing and Shanghai may soon rise in the rankings. Due to the nature of purchases in second home and ski destinations the next markets are more difficult to capture.

However, markets such as Sardinia, Portofino and other resorts in the French Alps are also seeing more activity at this level, a trend that we expect to continue.