_Savvy investments: The cities poised for 6% price growth in 2019
Madrid - 6%
Capital flight, particularly from politically volatile emerging markets, continues to fuel demand. A key safe-haven destination for Latin American wealth, according to the 2019 edition of the Knight Frank Wealth Report, 71% of UHNWIs in Latin America now have a second passport or dual nationality and of those considering emigrating, Spain was their preferred destination.A large proportion will want a slice of the capital’s luxury bricks and mortar.
Madrid is expected to lead Knight Frank's prime residential forecast in 2019 with prices edging 6% higher in 2019 thanks to relatively low cost of living and excellent quality of life; the city is ranked 46th out of 231 cities for its quality of life according to global consultants Mercer.
Areas to watch
Castellana North
Currently under construction, Castellana Norte is a new area to the north of Madrid straddling the prime districts of Chamartín and Fuencarral.
The project involves the remodelling of Madrid Chamartín railway station and aims to create 2.6 million sq m of mixed-used development Castellana Norte is expected to become one of the most sought-after areas in the whole of Madrid, attracting international students, young professionals and families with high purchasing power.
Standout new developments
Alcalá 141 is a new development of 20 exclusive apartments, located a few meters from Retiro Park in the prestigious Salamanca district of Madrid.
Berlin - 6%
Relatively young compared with other European cities (2019 marks its 30th birthday as a reunified city), as it continues to evolve, its capacity for future growth is significant.
Both the prime and mainstream markets have witnessed strong price growth in the last five years due to a shortage of new supply, an expanding population, a strong economy and a robust labour market.
Add to this the city’s low home ownership rate of only 15% and its young, skilled workforce and the sums add up for investors. Aside from German buyers Knight Frank's real estate partner in Berlin, Ziegert, are seeing significant interest from the UK, the US and Swiss purchasers. Most purchase within the €300,000-€700,000 price bracket.
Turkish buyers have been active since 2015 along with other Middle Eastern purchasers with many putting Berlin at the top of their safe haven list.
Areas to watch
Friedrichshain
Friedrichshain may now offer a plethora of entertainment, shopping and lifestyle options, but it has not always been this way. The area was once part of communist East Berlin and remains packed with relics from the German Democratic Republic era.
Now famed for its art scene, Friedrichshain is home to the East Side Gallery, the longest open-air gallery in the world, as well as Urban Spree, an independent contemporary art space that features urban artists and champions a grassroots approach.
This willingness to embrace the city’s history, while adding a unique futuristic edge, has attracted many large corporations including Coca-Cola, BASF, Universal Music and Mercedes. With these businesses come jobs and demand for rental property; a typical apartment in this trendy area starts at €430,000.
Standout new developments
At the junction of Berlin's hippest neighbourhoods Mitte, Friedrichshain and Kreuzberg, Upside Berlin is a new development offering unobstructed views of the River Spree.
Paris - 6 %
Steady and sustainable defines Paris’s 5.3% price growth in 2018, which comes on the back of a 12% uplift in 2017. The city’s wide Haussmannian boulevards are enticing French expatriates and appealing to overseas buyers, especially those from the US, the Middle East and China.
At around €19,000 per sq m, prime prices in Paris are around half those found in London and New York and with large scale regeneration projects planned ahead of the 2024 Paris Olympics.
Areas to watch
11th arrondissement Located on the edge of the historic Marais district, the 11th arrondissement is a young, vibrant neighbourhood.
Home to around 150,000 residents, the 11th is benefiting from the ripple effect emanating from the bohemian buyers that have already helped push up property values in the neighbouring 10th arrondissement.
Young single professionals gravitate towards the Oberkampf district to the north, while families veer further eastwards to take advantage of the parks and squares. Foodies and fashionistas flock to the chic eateries and boutiques in and around the Place de la République and Place de la Nation.
A three-bedroom apartment on one of the main boulevards starts at €850,000, while the same property in the 4th arrondissement would be closer to €1.2 million.
Cape Town
Forecast to be one of the top performing cities in 2019, Cape Town is expected to see price growth edging towards 6%.
In recent years, Cape Town’s luxury residential market outperformed the city’s wider mainstream market by some margin. The area near Table Mountain, including the Atlantic Seaboard and City Bowl, attracted strong inward migration from other parts of South Africa, to add to already significant foreign buying activity.
Against a backdrop of constrained supply – landlocked between the mountain and the coastline, development opportunities are scarce – prime prices increased by almost 20% year on year.
South Africa will remain the largest wealth hub in the region, with a 32% share of the ultra-wealthy population in five years’ time. Africa as a whole will see its UHNWI population grow by 31% in the decade to 2023.
Areas to watch
CBD
Cape Town’s CBD is emerging as a sought-after residential postcode. The city’s central core extends from the Harbour, with Strand Street and the railway station at its heart. Once dominated by highrise office blocks, an injection of new capital and innovative ideas is changing both the atmosphere and the skyline.
Initiatives such as First Thursday, when galleries and museums stay open late, the area’s world-class restaurants and its views of Table Mountain and Cape Town Harbour have led to an upsurge in interest from CBD workers anxious to spend more time enjoying their leisure and less time commuting in this notoriously congested city.
Typical prices range from 1.2 million rand for a studio to 30 million rand for a penthouse, with a two bedroom, two bathroom apartment with secure parking fetching an average 5 million rand.
Miami - 5%
With no income tax, no inheritance/estate tax and no sales tax as well as favourable corporate tax rates, the latest sales data looks to support the view that South Florida is firmly back in the spotlight for US high net worth individuals.
The appeal of owning a US dollar asset, South Florida’s easy accessibility, the state’s comparatively low property costs and its buoyant tourism industry have underpinned investor and second home interest with buyers from New York, Connecticut and New Jersey a key source of demand according to our US partners, Douglas Elliman.
South Florida’s investment in its infrastructure and world-class facilities has played a crucial role in broadening its appeal to a wider demographic. Miami hosts the world-renowned Art Basel each December and is home to exemplary sports facilities, including nine championship golf courses.
Such amenities along with the upgrading of the region’s two main airports – MIA and Fort Lauderdale – which together handle 50 million passengers each year and new funding for flood defences have helped reboot market sentiment.
Areas to watch
Downtown
Residential development is thriving in Downtown Miami. In the Central Business District, the completion of Brickell City Centre added approximately 800 residential units and plenty of retail to the Brickell submarket.
The two expanding sub-markets, Downtown and Edgewater, have over 2,700 units under construction. Downtown’s next luxury residential project, Miami Worldcenter, began construction in 2016, offering 500 plus residences, ample office and retail space, and access to the Brightline intercity rail system. Continued infrastructure expansion has made Miami one of America’s fastest developing cities.
Standout new developments
Arbor Residences is a leafy retreat made up of 52 residences nestled within the historic garden of Miami, Coconut Grove.
Valuable for investors and real estate professionals, the above information first appeared in Knight Frank's annual Wealth Report (2019) which charts global wealth flows, foreign real estate investment strategies, luxury residential markets and the cities set to outperform in 2019 and beyond.