INSIGHTS. WORLD CLASS The 10 cities shaping global real estate. World Cities Review

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1 INSIGHTS World Cities Review AUTUMN 2011 WORLD CLASS The cities shaping global real estate

2 KEY EMPIRE STATE BUILDING ORIENTAL PEARL TOWER EIFFEL TOWER BIG BEN ST BASIL S CATHEDRAL GATEWAY OF INDIA 1 MARINA BAY SANDS OPERA HOUSE BANK OF CHINA ASAKUSA KANNON TEMPLE 7 CITY POPULATION 8.3M AREA 469² MILES 7 CAPITAL VALUE GROWTH 05- % -JUL 11-2% POPULATION 7.5M AREA 607² MILES 2 CAPITAL VALUE GROWTH 05-27% -JUL 11 4% POPULATION 6.6M AREA 294² MILES 5 CAPITAL VALUE GROWTH 05-35% -JUL 11 % 5 2 ILLUSTRATIONS ADAM POINTER Welcome to Savills World Class index. Following the success of our Four Global Cities Review in the Spring, we are now reporting on cities that all compete for real estate investment on the world stage. These form our first World Class index of residential real estate price movements from There are many cities on this planet that claim global status. Some rank top in terms of lifestyle, quality of life, places to do business,tax havens,cities of culture.twenty six of the world s cities are megacities, with populations of over million people. Although some of Savills World Class cities are megacities and most rank highly on the plethora of global measures, their

3 WORLD CITIES REVIEW 9 POPULATION.5M AREA 417² MILES 9 CAPITAL VALUE GROWTH 05-84% -JUL 11 6% POPULATION 20.5M AREA 239² MILES CAPITAL VALUE GROWTH % -JUL 11 7% POPULATION 22.5M AREA 1125² MILES 6 CAPITAL VALUE GROWTH % -JUL 11 3% 4 POPULATION 3.9M AREA 273² MILES 4 CAPITAL VALUE GROWTH 05-92% -JUL 11 16% POPULATION 13.0M AREA 240² MILES 3 CAPITAL VALUE GROWTH 05-49% -JUL 11-3% POPULATION 7.1M AREA 426² MILES 1 CAPITAL VALUE GROWTH 05-79% -JUL 11 11% key qualification is an active and growing worldwide market in residential real estate. Our cities all have sizeable non-domestic sales and lettings markets and growing interest in them from overseas investors and occupants. They are cities that often feature as relocation and expansion targets on the lists of international companies. 8 POPULATION 4.6M AREA 8² MILES 8 CAPITAL VALUE GROWTH 05-21% -JUL 11 5%

4 WORLD CITIES REVIEW HOW THE TOP WORLD PLAYERS COMPARE THE PERFORMANCE AND FUTURE PROSPECTS OF OUR WORLD CLASS CITIES There is a difficulty in measuring just 1,800 sq ft (although the Moscow SAVILLS EXECUTIVE UNIT () residential real estate across executive would also likely have a large By comparing a group of real people, our continents because the way dacha or villa, in the nearby countryside cost comparison of residential real estate people live and what they expect differs greatly so too does the size and style of their homes. Even the way the size of the home is measured differs from country to country. (We have standardised all measurements here to GIA: Gross Internal Area). This, in itself gives some interesting results: a CEO in Sydney, Australia, might expect to occupy a large house totalling over,000 sq ft for example, but the same executive in Moscow would more for the weekends). We have also measured any second homes that people are likely to occupy as well. The international stereotypes of residential accommodation in different locations are not always accurate. Parisian dwellings are among the smallest while Shanghai residents enjoy some of the biggest, for example. Savills World Class index overcomes the differences between buildings by measuring the cost of housing an identical has a real world relocation story at its heart. We take a typical executive unit, a group of people that might start up or expand a global business in any country, and then compare the residential accommodation that they would be likely to inhabit in each of the world cities. The people who make up Savills Executive Unit () include one middle aged ex-pat CEO, one senior ex-pat director, a locally employed director and four locally-employed administrative staff. likely find themselves in an apartment of group of people in different countries. They each live in different types of 2 1 ALL IN THE NUMBERS COMPARING WORLDWIDE PROPERTY SIZES PROPERTY SIZE RANK SQ FT GIA* PER HOUSEHOLD NON-CEO PROPERTY SIZE RANK SQ FT GIA* PER NON-CEO HOUSEHOLD CEO PROPERTY SIZE RANK SQ FT GIA* PER CEO HOUSEHOLD RATIO OF SIZE OF THE CEO PROPERTY COMPARED TO THE NON-CEO PROPERTY HONG KONG *GIA (GROSS INTERNAL AREA)

5 WORLD CITIES REVIEW By comparing the accommodation costs of Savills Executive Unit we can truly compare the cost of residential real estate across some very different global cities SAVILLS EXECUTIVE UNIT () CONSISTS OF... MIDDLE AGED EX-PAT CEO SENIOR LOCALLY EX-PAT EMPLOYED DIRECTOR DIRECTOR LOCALLY EMPLOYED ADMIN STAFF household, some with children, some with partners and some without and each member of the group chooses different types of locations and different types of property in which to live. It is by comparing the accommodation costs of these people that we can truly compare the cost of residential real estate across some very different global cities. WORLD CLASS PRICE MOVEMENTS The value of all properties, owned by the, in all cities, rose by 77% on average between December 2005 and June Growth in the last six months was 6% and the index is expected to continue rising to the end of this year at a more subdued rate GLOBAL NEW WORLD OLD WORLD 05 TOTAL INDEX MOVEMENTS There have been big differences in the performance of individual cities: Mumbai grew by 154% over the last five and a half years, while New York is up only 7% over the whole period. There was no uniform pattern to price movements some cities like London, Hong Kong and Mumbai saw a 2007 peak, followed by a 2009 trough and subsequent value rebound. Other cities have seen no trough, either, like Shanghai and Singapore growing substantially with only a minor slowdown in 2009, or, like Paris and Sydney, seeing modest growth and a shallow trough on an upward-sloping plateau. OLD WORLD VERSUS NEW WORLD The biggest difference in performance can be seen between what might be called the old economies of Tokyo, London, Paris, Sydney and New York (which grew on average by 32% since 2005) and the new, or emerging, economies of Shanghai, Singapore, Hong Kong, Moscow and Mumbai which grew, on average, by 123% over the same period. It becomes apparent that the debtinduced crisis of 2008 was suffered most by the old world cities and not new world ones. The biggest old world value rebounds have been experienced in those cities that are most open to new world 11 PRICE GROWTH HONK KONG 154% 143% 123% 98% 94% 49% 44% 32% 27% 7% investment, most notably London, Sydney and Paris. Hong Kong is the most expensive city in which to buy all the properties to house the. It is followed by London, with Tokyo, Singapore and Paris close behind RELATIVE COST OF BUYING ( = 0) VALUE S After five years of very high price growth Hong Kong is now significantly more expensive than the other cities Hong Kong is characterised by limited land supply for expansion and price growth that has been fuelled by overseas cash (particularly from mainland China). It has seen government measures, which have started to cool the lower end of the market but we still expect to see growth in the remainder of The cities of London, Tokyo and Paris cost very similar amounts, near to the World Class average, while Sydney and New York look good value in the old world, rivalling Shanghai and Moscow in cost terms. At the other end of the scale, Mumbai costs 43% less than the average of all cities to house the whole but it is growing very fast from this low base

6 WORLD CITIES REVIEW THE RENTAL DIVIDEND EXPANDING OR RELOCATING? ACCURATE RENTAL COST S ARE KEY The total annual cost of renting all the accommodation needed by the for one year averages 257,000 across all cities, ranging from 366,000 in London to 115,000 in Mumbai. For any relocating or expanding business, these are sums worth noting in addition to office costs; they will impact on any rental allowances and relocation allowances for ex-pat staff and will probably have an impact on the pay demands of local staff too. London and Paris have the highest rental levels of the World Class cities and these are fuelled by domestic, as well as corporate, demand as would-be purchasers are pushed into the rental sector due to credit restrictions. Hong Kong, Tokyo and New York are also high priced rental cities and, in common with all of the top five, are driven by ex-pat/corporate demand at the top levels THE RELATIVE COST OF RENTING = 0 WORLD CLASSRENT MOVEMENTS Rents have moved, on average, across all cities at a slower pace than capital values, suppressing yields. There is an old world / new world difference in the growth of rents but it is not as pronounced as with capital values. This highlights that strong capital-growth-motivated investment is driving capital values in the new world, meaning that yields are moving much faster in these cities. In consequence, it might be said that there is a stronger case for rental-return-motivated investment in the cities of the old world COST OF RENTAL GROWTH INDEX GLOBAL NEW WORLD OLD WORLD % % OLD WORLD NEW WORLD TOTAL ANNUAL COST OF RENTAL ACCOMMODATION %.1% , , ,

7 DEMAND AT THE TOP OF THE MARKET IS SETTING RECORDS Hong Kong s rise since 1997 to become a key global financial centre, if not the key financial centre in the region, has been meteoric. Occupier demand and buyer confidence in the city s residential real estate has been equal to it so price growth has also been spectacular, despite experiencing a temporary knock by the global banking crisis of While genuine occupier demand, evidenced by rental increases, is strong, demand for the purchase of trophy assets is stronger. There is huge demand for investment properties from the Chinese mainland, coupled with restricted supply. Cash-rich buyers therefore continue to buoy prime markets. Despite attempts to introduce cooling measures, strong interest in traditional areas, means that luxury prices in Mid- Levels, Southside and The Peak continued to outperform other markets. Overwhelming demand for property at the very top of the market is setting global records. The extreme scarcity of prime houses on The Peak is perhaps an exaggerated caricature of the fundamental problem affecting all World Class cities; there are simply just not enough of the most desirable properties to go round. Rents have not kept pace with this capital growth in Hong Kong so yields have come in even though leasing supply is limited. 1WORLD CITIES REVIEW KEY FACTS SAVILLS EXCUTIVE UNIT () CAPITAL CAPITAL COST IN CLASS COST +7% COST 3 3.1% 79% 11% RENTAL CAPITAL GROWTH TOTAL SQ FT PER SQ FT 1.6 SQ FT ,090 1,370 RENTAL COST IN CLASS +24% Hong Kong s extreme scarcity of prime houses is an exaggerated caricature of the problem affecting all World Class cities CHINA RENTAL 3.1%

8 WORLD CITIES REVIEW A PROPERTY IS STILL VIEWED BY MANY AS SAFE STORE OF WEALTH Although no longer the most expensive bricks and mortar in the world, London property is still highly valued. The purchase of a London house or flat is viewed by many global players as a safe store of wealth. Showing lower growth but also much less volatility than many of its new world counterparts, there appears to be some foundation for this view of London. Across the city s prime areas, international buyers constitute 40% of the market by value. Even in the suburbs, Greater London is a cosmopolitan city. As an established global city and major financial centre, London attracts businesses and residents from every part of the world as well as a strong investor market, currently buoyed by sterling s weak exchange rate. Demand for rental property is strong, and is fuelling rent rises. Both corporate demand (which has been growing with economic recovery) in the upper tiers of the rental sector and domestic demand from would-be purchasers, unable to obtain credit, has been encouraging rent rises. This is a common story in the debt-reliant western world. A steady inflow of overseas equity (which we estimated last year to total 3.7 billion) has fuelled price rises in the London market and seen it substantially outperform the rest of the UK. The value of the executive unit accommodation is near its former peak but we do expect that growth will ease over the next year or so. KEY FACTS 2 SAVILLS EXCUTIVE UNIT () CAPITAL CAPITAL COST IN CLASS COST +27% COST 1 5.1% 27% 4% RENTAL CAPITAL GROWTH TOTAL SQ FT PER SQ FT 1.6 SQ FT , RENTAL COST IN CLASS +42% London attracts residents and businesses from every part of the world, plus the weak exchange rate buoys a strong investor market UK

9 VALUING LAND OVER BUILDINGS MAKES A UNIQUE MARKET Tokyo residential real estate is perhaps one of the most different of the World City markets in that it is land that is valued, not the building. Tokyo s dwellings are similar to a new car in that the value will depreciate almost as soon as it is built. Housing is assumed to have a limited lifespan and generally replaced after 20 to 40 years. After a decade-long housing slump, steady price appreciation was seen from the mid-2000s until the financial crisis of 2008, which saw prices fall back again. Values picked up in late 2009, but the recent earthquake cooled demand, particularly in the luxury market, although the mid-market is said to be stable. Although rents have also declined since the mid-1990s, property prices have fallen faster, pushing out yields. This should provide a buying opportunity for Japan s Real Estate Investment Trusts ( JREITs). They were particularly big investors between 2005 and 2007, until the onset of the financial crisis. Their renewed interest in high rental income could cause yields to harden again. The types of properties rented are very different to the types of those for sale. Rental properties are purpose-built, located in and around the central business districts, targeted at employees of those areas, and command the higher prices. For purchase, inhabitants are more likely to choose detached houses in the suburbs. Admin staff will still live in the city centre, but in very small apartments or commute from cheaper accommodation in one of many sleeper cities. 3WORLD CITIES REVIEW KEY FACTS SAVILLS EXCUTIVE UNIT () CAPITAL CAPITAL COST IN CLASS COST +12% COST 4 49% RENTAL 4.2% CAPITAL GROWTH -3% TOTAL SQ FT PER SQ FT 1.6 SQ FT , RENTAL COST IN CLASS +23% Although Tokyo s rents have also declined since the mid-1990s, property prices have fallen faster, pushing out yields JAPAN

10 WORLD CITIES REVIEW THE CITY WITH THE WORLD S HIGHEST CONCENTRATION OF MILLIONAIRES With annualised growth in residential prices currently running at 16%, Singapore is a new world market writ large. Property prices have boomed since the economy rebounded in The average price rise of properties in the executive unit was 123% between Dec 05 and Jun 11. The city state s open door policy towards top end foreign economic contributors, who traditionally gravitate towards prime districts, means rental demand is high. Investor demand is also strong because Singapore has the highest concentration of millionaire households in the world (16% with $1 million plus), and their capacity to buy residential property is obviously high. As foreigners without Permanent Residency status are generally only permitted to purchase private apartments and condominiums, the weight of foreign money in this segment of the Singapore residential market has also buoyed both prices and rentals. The rises have been fuelled by a strong economy, ever increasing international purchasers from a booming Asia region, coupled with tightly restricted land supply and, at the very top of the market, extremely limited stock. This looks set to remain unalleviated in the foreseeable future as new land for development is limited and price growth in the luxury homes market is likely to be sustained. 4 KEY FACTS SAVILLS EXCUTIVE UNIT () CAPITAL CAPITAL COST IN CLASS COST +% COST 6 4.1% 92% 16% RENTAL CAPITAL GROWTH TOTAL SQ FT PER SQ FT 1.6 SQ FT ,6 590 RENTAL COST IN CLASS -2% The rises have been fuelled by a strong economy, increasing international purchasers, restricted supply and extremely limited stock - -

11 UPWARD PRICE MOVEMENT CONTINUED IN 2011 WITH STRONG DEMAND As an international, cultural centre, Paris rivals London and is currently seeing almost as much overseas investor activity. It is nevertheless a very different real estate market with a small and constrained prime centre made up almost exclusively of apartments. Residential stock in prime central Paris is largely historic, with very few new developments and very few houses. There is strong international demand at the top end of the Paris market, and increasing investment from BRIC economies, particularly while the Euro remains weak. Against this, prices are driving upwards on the back of the shortage of new supply. Upward price movement continued into 2011, with sustained strong demand and few available properties. Positive growth in transaction volumes and prices in 2011 has been largely in the rare new apartment segment. Price growth across the whole Ile de France region is being led by central Paris, in much the same way as central London is leading growth in Greater London and the Home Counties. Also similar to many World Class cities, Paris with its historic fabric and bounded by the inner suburbs has very constrained land supply and expansion potential. Like many old world cities it will rely on the regeneration of old industrial and deprived areas to create new 21st century living quarters. 5WORLD CITIES REVIEW KEY FACTS SAVILLS EXCUTIVE UNIT () CAPITAL CAPITAL COST IN CLASS COST +% COST 2 4.6% 35% % RENTAL CAPITAL GROWTH TOTAL SQ FT PER SQ FT 1.6 SQ FT , RENTAL COST IN CLASS +41% There is strong international demand at the top end of the Paris market and investment from BRIC economies FRANCE

12 WORLD CITIES REVIEW RAPID ECONOMIC GROWTH HAS FUELLED GROWTH IN THE HOUSING MARKET Shanghai s metro population is the largest in China, described as the showpiece of the booming economy of mainland China. Rapid re-development began in 1990s, and Shanghai is now a national financial centre and aspires to be an international financial centre by Shanghai ranks fifth in the latest edition of the Global Financial Centres Index. The rapid economic growth has fuelled a substantial rise in the housing market. A number of government measures, including property taxes, have since been applied to cool the market and these appear to have had an effect this year, particularly on the top end of the market, where investor activity is concentrated. Shanghai, like most other first and second-tier cities in China, has announced that it plans to keep annual residential price growth from exceeding annual growth in the municipality s GDP and disposable income. This equates to roughly 8%. Although low in relation to recent growth, there is a large social housing programme underway, which will lower the average price (so Shanghai will hit the target) and values are not likely to fall off a cliff. Although prices have risen steeply, rents have not moved much (until recently) and yields are consequently very low. Controls to cool prices can have the side effect of stimulating rental growth so, although Shanghai s rents have not moved much yet, the prospects for growth are good. Demand is growing from a cooling sales market and corporate activity, including expats, plus inward migration and investment. KEY FACTS 6 SAVILLS EXCUTIVE UNIT () CAPITAL CAPITAL COST IN CLASS COST -21% COST 9 2.2% 136% 3% RENTAL CAPITAL GROWTH TOTAL SQ FT PER SQ FT 1.6 SQ FT , RENTAL COST IN CLASS -53% Controls to cool prices can have the side effect of stimulating rental growth so the prospects for growth look good CHINA

13 THE BIG APPLE HAS SHOWN THE LEAST GROWTH OF ANY OF THE TOP New York at least is a part of the Americas that can now call itself old world. New York s residential real estate displays all the characteristics shown by the other debt-reliant North Atlantic economies, which suffered from the financial crisis of New York has shown the least growth of any of the World Class of still standing at its 2005 level. As a stable, high quality, established and cosmopolitan world financial and cultural centre, New York is looking exceptionally good value at present. New York, as a global city, has outperformed the national average over the same period. Once again, the global city characteristics of constrained space, little new development and burgeoning global demand has saved NY from the fate of continued falls but, although international purchasers are a growing presence, they are not on the scale of some cities such as London.The Big Apple is a rental town, and largely an American one, although the Venezuelans, French, Germans and Chinese are all present in the market and, at the super-high end, Russian buyers. Overseas buyers are often looking for good student accommodation for their offspring. With the economy still struggling and no impact from bonuses on Wall Street this year, prospects for growth are still weak but lengthened yields and longer term prospects offer some incentives. 7WORLD CITIES REVIEW KEY FACTS SAVILLS EXCUTIVE UNIT () CAPITAL CAPITAL COST IN CLASS COST -31% COST 5 % RENTAL 6.2% CAPITAL GROWTH -2% TOTAL SQ FT PER SQ FT 1.6 SQ FT , RENTAL COST IN CLASS +21% The Big Apple is a rental town, and it is largely an American one NORTH AMERICA

14 WORLD CITIES REVIEW A STABLE INVESTMENT CHOICE WITH AN ESTABLISHED HOUSING MARKET Sydney has long had a high profile on the global stage but might be described as only recently bursting forth into the World Class when it comes to residential real estate. It is a stable and high-quality old world investment choice with a well established luxury housing market within an emerging New World region that is booming, although domestic affordability pressures coupled with global economic uncertainty has put pressure on prices in recent months. Our analysis of the executive unit housing would seem to illustrate that recent stagnation is confined to the very top and bottom of the market, varying suburb by suburb. Following fears that overseas buyers were contributing to a housing bubble, restrictions were placed on the purchase of homes by foreigners, which have had some impact on transactions. The average growth rates shown therefore disguise some extremes around the average, while an underlying housing shortage remains. The city s undersupply of accommodation and high in-migration plus restrictions on new development (due to zoning and geography) are likely to keep prices the highest of any Australian city. It would appear that Sydney is beginning to display many of the common characteristics of the World Class city constrained land supply, increasing pressure from overseas investors and high demand for prime accommodation but it is unusual in offering very spacious living accommodation in relation to other world cities. KEY FACTS 8 SAVILLS EXCUTIVE UNIT () CAPITAL CAPITAL COST IN CLASS -33% COST 7 4.7% 21% 5% RENTAL CAPITAL GROWTH TOTAL SQ FT PER SQ FT 1.6 SQ FT , COST RENTAL COST IN CLASS +23% Sydney s undersupply of accommodation, high inmigration and restrictions on new development are likely to keep prices high AUSTRALIA

15 THE FASTEST GROWING OF THE WORLD CITIES BETWEEN Moscow s prime markets are much more reliant on domestic buyers and are far less cosmopolitan than London or Paris. Consequently, the performance of the Russian domestic economy is tightly interwoven with the performance of its residential property. The markets were hit badly in 2008 and 2009 by economic recession as global demand for Russia s energy resources plummeted and the domestic economy faltered. Investment in Moscow s residential real estate has closely followed the money being made in the national economy, primarily in raw commodities such as oil. As a market driven by domestic buyers, Moscow s residential real estate market reflects the volatility of a fast growing emerging market but has also shown the growth to match. Moscow was the fastest growing of the world cities between 2005 and Since global commodity prices have rallied, there has been renewed vigour in the market and prices are rising again, albeit not at the same rate as pre Moscow currently stands fifth in terms of growth levels over the whole period, just below Hong Kong. Like all of the World Class cities under study, Moscow s residential supply struggles to keep pace with demand. Measures are being put in place to boost housing delivery in an attempt to improve price stability but how successful they will be remains to be seen. 9WORLD CITIES REVIEW KEY FACTS SAVILLS EXCUTIVE UNIT () CAPITAL CAPITAL COST IN CLASS COST -38% COST 8 5.6% 84% 6% RENTAL CAPITAL GROWTH TOTAL SQ FT PER SQ FT SQ FT , RENTAL COST IN CLASS -29% Driven by domestic buyers, Moscow s residential real estate reflects the volatility of a fast growing, emerging market RUSSIA

16 WORLD CITIES REVIEW THE NEWEST ADDITION TO THE LEAGUE OF WORLD CLASS CITIES KEY FACTS SAVILLS EXCUTIVE UNIT () CAPITAL CAPITAL COST IN CLASS COST -43% Mumbai is the newest addition to the league of World Class cities and is perhaps feeling uneasy in its role. Like all of the new world economies in this report it has seen high levels of (volatile) price growth, albeit off a low base, and currently stands the highest performing residential real estate market since There is a widespread sense that the extraordinary house price growth seen in recent years, despite the 2008 downward correction, is unsustainable. As is the way when cities come on to the world stage and adjust from being national capital to World Class cities, house prices in Mumbai have become unaffordable for many ordinary people. The pressures of growth and demand impinge on Mumbai in much the same way as they do on Hong Kong and Singapore. Mumbai is physically constrained by being on a peninsula where significant infrastructure investment is required for the city to expand. There is widespread feeling in the city that Mumbai s housing market is a bubble waiting to burst, but whether this is the case, or whether it is entering a new global league of internationally priced cities, remains to be seen. This basic pressure on space has pushed up the cost of accommodation for everyone. Mumbai has seen spectacular growth in rents, up 69% over five years, but capital values grew 138% over the same period, suppressing yields. COST 3.1% 138% 7% RENTAL CAPITAL GROWTH TOTAL SQ FT PER SQ FT 1.6 SQ FT , RENTAL COST IN CLASS -55% There is a widespread feeling in the city that Mumbai s housing market is in a bubble waiting to burst INDIA

17 WORLD CITIES REVIEW THE INTERNATIONAL SUPER-WEALTHY THE WORLD CLASS BILLIONAIRE HOMES MARKET IS PERFORMING WELL World Class cities not only attract international business people but are also the haunt of the super-wealthy. Global billionaires who can make any country their home, and often have several different residences across the globe, are important inward investors in residential real estate. It is interesting that, in the cities where average dwelling sizes are among the smallest (e.g. Paris and Tokyo) billionaires will occupy amongst the largest spaces of any city.they are buying what is most rare. In Moscow, where the billionaire s city dwelling is a relatively modest 4,600 sq ft, this is compensated by an enormous 21,500 sq ft mansion in the nearby countryside. VALUE In Hong Kong, the rarest commodity on the island is houses on The Peak, and Southside. Although they rank among the smallest World Class billionaire properties (at around 5,200 sq ft), each of those square feet is the most expensive in the world.tokyo is the next most expensive, due to exceptionally high land values in central Tokyo, although it is not a market known for international billionaires (most would be Japanese). Billionaire s properties tell a different story to the executive unit.the ultra prime, billionaires markets in all cities out-performed during the boom of 2007 and have also out-performed the in the six months to June 2011.This reflects the rate at which new billionaires have been created across the globe and the rate at which they have invested in global real estate in both emerged new world cities and in established old world ones like London, Paris and New York. PROSPECTS FOR FUTURE INVESTMENT These established western markets have seen steady growth but not the same volatility as cities in the new world, making them attractive safe havens for billionaires wealth. We anticipate that Sydney, for example, has this potential in the Pacific region. It is likely that the World Class billionaire homes market will continue to out-perform other markets for as long as the boom in global commodities and other markets continues and helps create new billionaires. There are already signs that a wall of money from this sector is waiting to get out of China so currency export restrictions are a key indicator for investors to watch there. Continuing political upheaval, war and civil unrest in various other parts of the world, will ensure that there is continued demand from the international elite for safe havens in World Class cities. Unfortunately, this demand is assured for the foreseeable future. We increasingly expect that some of this demand will find its way to new world cities as well as the old in future BILLIONAIRE VS EXECUTIVE UNIT BILLIONAIRES CAPITAL GROWTH OF BILLIONAIRE PROPERTY 83% % 05-11% - JUL 11 PROPERTY SIZE SIZE RATIO COMPARED TO BILLIONAIRE GLOBAL BILLIONAIRES PER SQ FT FOR BILLIONAIRE PROPERTY 49% 23% 38% 3% 1% 2% 26% 0% 11 19,380 SQ FT 16,0 SQ FT 12,300 SQ FT,760 SQ FT 7,860 SQ FT 6,790 SQ FT 6,500 SQ FT 5,380 SQ FT 5,200 SQ FT 4,630 SQ FT -2% 32% 3% 144% 16% 138% 7% 21% 40% 7 x x x x x x x x x x 6,700 5,190 3,270 3,090 2,520 2,270 1,320 1,

18 0 WORLD CITIES REVIEW WHEN THE CITY IS NOT ENOUGH... IN SOME CITIES LEISURE PROPERTIES ARE AN ESSENTIAL PART OF THE DEAL Big cities have many attractions and may be the sole place of residence for half of the world s population but many wealthy city enclaves are still empty at weekends. The tradition of spending the weekend in the countryside is well-established in many old world cities like New York, Paris, London and Moscow. It is likely that the CEO in our executive unit, who occupies a small apartment in Paris or Moscow during the week, would have a second home in the country. Those in Asian city states like Hong Kong and Singapore are more likely to travel to neighbouring countries such as Thailand, Malaysia and Indonesia to enjoy their second homes. For the Global Billionaire, meanwhile, a leisure home forms an integral part of overall accommodation needs. We have measured the leisure accommodation of both the CEO and global billionaire households in our World Class leisure properties index. This index is an eclectic mix of Thai resort villas, Russian dachas, English country houses and French Riviera estates. Nevertheless, these residential properties can be seen as an important component of World Class city life. UNDER PERFORMANCE Leisure property has not seen the same level of performance as the main city residences. The leisure index increased by only 33% between December 2005 and June 2011, compared to 77% in the city index over the same period. This reflects the singularity of the World Class Leisure property is a discretionary purchase and was one of the first luxuries to go in the downturn city and the way its residential markets have little to do with the domestic economy. Second homes nestled in a city s hinterland are more prone to the condition of the domestic, and even the rural economy, rather than the wealth being generated in the city state. It is not surprising then that World Class leisure property experienced the greatest growth during the global economic boom period in the years up to the end of 2007 but, as domestic economies suffered more in the global recession of 2008, leisure properties fell more averaging -12% compared to -6% in the city. Leisure property is a discretionary purchase and was one of the first luxuries to go in the downturn. Some of the countries of South East Asia where leisure properties are situated have not seen the same levels of value growth, hence the World Class leisure index has not received the same boost as the cities index. It has yet to return to its 2007 peak. HOME FROM HOME THE GLOBAL LEISURE VALUES INDEX CITY PROPERTY LEISURE PROPERTY INDEX

19 world cities review Expert commentary Savills agents are at the heart of the global property market Hong kong london moscow New York Raymond Lee Savills Hong Kong Jonathan Hewlett Savills London +44 (0) Alexander Shatalov Intermark Savills +7 (495) intermarksavills.ru Jatin Patel Savills India Elizabeth Stribling Stribling Associates Hong Kong s real estate is absorbing the wealth of the Asia Pacific region The world is using London as a safe haven store of wealth Closely linked to commodities markets, Moscow s real estate is a further play on the wealth created in the CIS s main industries Mumbai is making the transition from a major national city to fully-fledged global city and its real estate prices reflect this paris shanghai singapore Sydney tokyo Jean Claude Caputo Riviera Estates +33 (0) jc.caputo@ riviera-estates.net Albert Lau Savills Shanghai +(8621) albert.lau@savills.com.cn Christopher Marriott Savills Singapore cjmarriott@savills.asia Shayne Harris Savills Sydney +61 (0) sharris@savills.com.au Chris Mancini Savills Tokyo +81 (0) cmancini@savills.co.jp The creation of new wealth in China has made Shanghai and its real estate a showpiece of the booming economy High demand from overseas occupiers and limited space keeps rents and capital values high A strong investment proposition with all the advantages of an old world city, in the booming Asia Pacific region Tokyo has joined the old world economies and its land offers a stable investment proposition Paris is rivalling London to attract buyers who seek old world stability New York s attractions, currently low prices and a favourable exchange rate, mean the city is poised to attract global HNWI research contacts Yolande Barnes Savills Residential Research +44 (0) ybarnes@savills.com Simon Smith Savills Research & Consultancy ssmith@savills.com.hk Paul Tostevin ptostevin@savills.com Rebecca Gill rgill@savills.com Sophie Chick schick@savills.com Insights is published on behalf of Savills (L&P) Ltd by Blue Door Media Ltd, bluedoor-media.co.uk. All information correct at time of going to press. All rights reserved. Articles may not be reproduced without written permission from Savills (L&P) Ltd. While every care is taken in compiling the content, neither the publisher nor Savills (L&P) Ltd assumes responsibility for effects arising from this publication. Property Misdescriptions Act Savills recommends applicants discuss their interest in a property with the negotiator who can answer your specific questions and advise if it is under offer. This is important if you are contemplating travelling some distance. All descriptions, dimensions, references to condition and permissions for use and occupation, and other details are given without responsibility, and any intending purchasers or tenants should not rely on them as statements of fact, but must satisfy themselves by inspection of the property. Investment advice The information and opinions contained in this magazine do not constitute professional advice and should not be relied upon. Specific advice relating to your individual circumstances should be obtained savills.com

20 Residential markets in our World Class Cities have more in common with each other than the mainstream markets of the countries in which they operate