City among 'best return' locations

A mixture of alternative global locations such as Bangkok, Dublin and Nairobi and new locations in established cities such as New York, Los Angeles, Munich and Shanghai will offer the best returns next year, according to Knight Frank’s “2015 Prime Residential Price Growth Forecast”.

Liam Bailey, head of research at the property consultancy, said that with the macroeconomic environment set for a shift away from stimulus measures in 2015, “We believe a renewed focus on spotting micro-market opportunities is set to take centre stage. The ability of investors and developers to enjoy healthy returns from the residential market from 2015 will require a greater investment in the search for out-performance.”

In many markets, which have prices well ahead of pre-crash peak levels, average returns will be less exciting in the next five years compared with the previous five, he said.

“As prices have risen in some target markets, the opportunity for developers to attract buyers to alternative markets within the same cities, or even alternative city markets, is a trend we expect to see expand in 2015.

“While the ever-popular global hubs are set to take the lion’s share of this investment, we also think 2015 will see a growing appetite for alternative markets and more speculative plays from investors. Safe-haven investors who might previously have only considered established-market neighbourhoods are now looking for new market opportunities in places like London, Sydney, New York, Miami and Vancouver,” he added.

According to Knight Frank’s “Global Cities 2015 Report”, investor appetite has returned for Europe as the tentative improvement in economic fortunes there has fed into a belief that prices for property have hit a low point. 

The company anticipates seeing a greater focus on opportunities in markets like Paris and Rome, which thus far have been largely overlooked by investors, nervous of political uncertainty, but which are increasingly offering good value when compared with neighbouring alternatives.

 

India  

The report also flags India as a notable example of increased business confidence, which will fuel the residential market in conjunction with government policies to improve residential-market affordability.

Economic growth will drive some markets. By international standards, Dubai’s prime residential property market is relatively inexpensive and this, combined with the fact that the United Arab Emirates’ economy and employment continue to grow strongly, suggests that the prime residential market in the emirate is likely to see ongoing expansion despite new market controls.

Bailey said investors and developers would have to accept that recent returns had been supercharged by government market support, and such features as cheap financing, delivered through ultra-low interest rates, and the ability of quantitative easing to hold down the rate of alternative investment returns, would begin to be removed from 2015 onwards.