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A Comparision of the Top Real Estate Markets in the World

Posted by Manuj Garg on August 4, 2021
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The real estate market is characterized by residential and commercial properties. It also includes industrial estates and vacant plots of land. In an increasingly globalized world, the property market has become complex and dynamic. The agencies and brokers, who operate in this business, do their best to capitalize on demand and rake in the profits. With globalization opening up the markets, investors now have multiple options to invest in and reap the benefits. Choosing the right place among the top real estate markets in the world, becomes all the more important in the current scenario.

The world market size is expected to reach US$ 4263.7 Billion. However, there are too many factors that affect this business. They not only include supply and demand, but also macro-economic indicators. Some of these are interest rates, population, quarterly growth, and mortgage facilities.

Also, the real estate market is affected by laws and taxation policies. Consumer confidence, unemployment levels, and affordability also play a key role. Moreover, geographical factors and global purchasing power trends have a great influence on the rise and fall of housing prices.

For example, a city like New York or London can be very expensive. In contrast, Miami and Dubai can be relatively cheap, yet gives impressive returns, particularly for global investors. Even within a city, the prices fluctuate based on the location’s primacy. Also, data has become very important to gauge the global market mood.

Top Real Estate Markets In The World

Location plays a significant role in property investments. On one hand if a small 2 BHK apartment in New York or Mumbai is considered as a prime asset, the luxury villas and penthouses in Dubai or Hong Kong can yield higher rents on the other. Let us take a look at the top cities with attractive residential and commercial accommodations.

1. New York

New York is a historical city that has seen many ups and downs. The real estate market is predicted to rebound in a couple of years. The property inventory has grown steadily and interest rates are also very low.

In Manhattan, apartment sales prices fell by 11% in the first quarter of 2020. They are expected to fall further down to 30%, before recovering. Although the inventory and housing demand have shrunk, the median sales price in New York is still at US$ 270,000.

The city is however very famous for 1 or 2 bedroom rental apartments. Experts say investors who can hold on to the property for 5 or 6 years should only purchase. The best locations include East Brooklyn, High Bridge, and Saint Albans(US$ 1200 to US$1500 monthly rent).

2. London & UK

The UK is a saturated real estate market with very high property prices. In the last 7 years, London city has registered a double-digit increase in sales costs. The average house price has grown from £257,000 to £474,000. The Government also increased the transaction tax for luxury property deals.

They also modified the stamp duty on investment properties. But the demand for housing has not picked up due to exorbitant costs. However, market analysts predict a recovery by the year 2021. The rates for the next quarter are estimated to further increase by 4% to 6%.

3. Miami

Miami is right behind Los Angeles, New York, and Washington D.C. The city is famous for renting more than 70% of the properties. The average sales price of a home is around US$ 342,000. The rates are expected to increase by up to 9% in the next few months. However, the city offers a wide range of luxurious estates. They include apartments, penthouses, beautiful homes, and condominiums. Cautious experts predict soft growth in the coming few months and years.

4. San Francisco

Compared to Miami, San Francisco is a highly competitive segment. The average house price in the city is around US$ 1.45 Million. The average costs increased by up to 3% in the last few years. The projection for the future also suggests a property price rise of up to 1%. However, the IT workforce “works from home”, and demand has declined. The median monthly rent here is around US$ 4200. The rent in hi-tech locations has dropped steeply between 14.3% and 16%.

5 Sydney

The beautiful Australian city has enticing suburban housing facilities. But the average house sales price has peaked at $1 million. The market recovered quickly after the pandemic and estate values increased by 11% to 16% since last year. But the rental market will take some time due to poor migration and lack of demand. The gross rental yield has hit a record new low of 2.9% this year. Experts advise investors to have faith in A and B grade homes as well as property upgrades.

6. Los Angeles

The county offers a sophisticated lifestyle in cities like Beverly Hills, Santa Monica, and Pasadena. Buyers also love to live in Beverly Hills, San Marino, Burbank, and Malibu. In the last 5 years, the sales prices peaked at US$800,000 but slowed down subsequently. The average house price is hovering at around US$ 730,000. The market is still much more competitive than San Francisco. But experts predict a slower recovery rate over one year due to economic uncertainties.

7. Dubai

Dubai is a royal global destination with breathtaking properties. The amazing villas, seafront mansions, and luxury apartments are second to none. In just one year, commercial property prices fell by 13% to 15%. Even the average house rents have decreased by 10% between 2017-18. While developers however are optimistic as they rethink their business model, this is considered as the best time for investors. They are focusing on the residential market to increase sales and recover soon. On the whole, based on the various factors that influence investors’ returns, Dubai can be said as the wisest option in the current scenario.

8. Singapore

The city-state’s economy was growing at a healthy 3% two years back. Currently, it has slowed down to a paltry 0.7% only. The average house prices(per square feet) are in the range between US$1830 to US$910. You can purchase a residential property at US$ 874,372. But economic uncertainty reduced demand, and experts suggest long-term investments.

9. Hong Kong

Hong Kong is one of the most expensive cities in the Asian market. The average real estate value is at US$1.235 million. The economic downturn in mainland China is expected to affect demand here. Besides, local agitations are also leading to a rise in the risk factors. Small to medium-sized flats are a good buy for those who are not averse to risk.

10. New Delhi

The Indian capital city has prime residential and rental properties. In the recent times, the housing sales were down by 22%. The Delhi-NCR region offers a diverse range of real estate for the buyers. The average house sales price is around 32 Million Rupees or the US $432,000. The trends for the last 6 months have shown a rise in costs. But there are localities were the prices have decreased due to adjustments.

11. Mumbai

The commercial capital of India is one of the most expensive places in the world. An average suburban home with 3 bedrooms will cost US$ 82,168 or 63 lac Rupees. In the last decade, prices have increased steeply by 12.7%. But these prime residential properties are now seeing a price decline of up to 5%. Experts predict a further decline in prices by 3% with higher unsold inventories. But experts predict more stable prices and improved buyer sentiment very soon.

Real Estate Market Comparison

The above-mentioned cities are always abuzz with commercial activity. But these geographically-diverse places are also socially, politically, and culturally very different. Comparing two different markets is always a tricky art.

Shares and stock price indices are valuable but do not reveal much. A more reliable technique would be to compare affordability indices. The price income ratios as well as rental yields are also trustworthy indicators. Besides, we can always look at the average property price levels.

Affordability

If you go by sheer expenses, Mumbai, Hong Kong, and Delhi take the cake. The Indian cities are populous with 20 to 30 million people, while Hong Kong only has 7.4 million population. London with 10.5 million inhabitants follows suit. While Singapore and Sydney with 5 to 6 million people each are also not very affordable.

Dubai with only 2.8 million citizens is very well affordable and makes up as the best option, while the US cities are not bad either. New York, San Francisco, Los Angeles, and Miami – in that order – are relatively investor-friendly compared to other cities of the country. The populations in these metros are also in the 20 million down to 6 million range.

Commercial Viability

Investors and rent collectors want their properties to compete effectively. They also want profitable returns reassuringly. If we go by commercial viability, then nothing beats Dubai. Los Angeles, Hong Kong, and Singapore are not far behind either.

San Francisco has become less significant due to lowered demand. Indian cities like Delhi and Mumbai also promise moderate success only. Sydney and Miami have also lost favour with the investors.

Economic Status

The economic ranking suggests a mature and reliable real estate market. In this regard, the properties of New York, Los Angeles, and Dubai rule the roost. Surprisingly, Indian and Singapore markets are also doing well here. The highly expensive Hong Kong city is going through socio-economic troubles as well as political unrest.

But San Francisco and Miami are expected to shine once again. Experts however caution investors and homebuyers about Sydney and London. The prices in London in particular have plunged and the major real estate players are taking corrective actions.

Investment Destination

A city’s prime properties have to add value to an investor’s portfolio. A high ranking in the real estate destination list indicates a safe investment. Again, New York and Dubai dominate because of their mature real estate market, while Delhi, Mumbai, London and Miami are not finding much favor.

The residential and commercial properties in Hong Kong and Singapore still find takers, while the major investors are more circumspect about Sydney and San Francisco. The fall in rental prospects has affected some of these cities, while changing workforce dynamics has slowed down a hi-tech destination like San Francisco.

Global Investors

For the first time since the 2008 financial crisis, the global economy has slowed down drastically. Slowing down of economies across the world, as well as the trade wars between the USA and China, have created great uncertainty. The 37-member OECD predicts a paltry growth of 3% due to unpredictable macro-economic factors.

UK

A major FDI destination like the United Kingdom has not been spared either. In the last couple of years, the investments dropped from US$ 44 billion to US$ 19 billion. Builders here are attracting global investors into the residential market segment.

They are also offering hostel properties fit for rentals at reduced prices. The government has also lowered the stamp duty on luxury properties. They also reduced the tax burden on medium and low-cost house purchases. How the market forces react will become clear in the next couple of years.

India

In the first quarter of 2019, India attracted US$4.2 billion into the realty market. Market observers predicted a rise of 5% up to US$ 6.5 billion by 2020. Global wealth managers have promised investors a whopping return of 100% to 300% on investments.

Indian market dynamics are very peculiar and there is a lot of complexity. The property segment is not too dissimilar and there are many influential factors. Sluggish real estate growth has created a lot of doubt among investors. But compared to the US or Europe, India is still a relatively very attractive proposition for buyers.

Experts say that the global portfolio managers are getting influenced by short-term possibilities. If they look at the long-term returns, Mumbai and Delhi are still very viable. But, investors are being circumspect due to price mechanisms, liquidity, credit transactions, and risk-benefit issues.

Asia-Pacific

Global capital flows into the Asia-Pacific region have been very high in recent years. Direct investments into real estate markets are healthy. Commercial assets are being acquired using private wealth, pooled funds, and multiple accounts.

Sydney, for example, has been a global top 30 shopping destination. Hong Kong is a big challenge due to exorbitant prices and domestic, political troubles. But experts say commercial properties in this part of the world are still very beneficial.

USA

The global investments in the last quarter of 2019 fell by more than 2%. The previous year the market volumes rose to a spectacular US$769 billion. By the end of third quarter of 19-20 financial year, the global commercial property investments had a total value of US$326 billion.

The real estate investments worldwide also peaked up to US$800 billion. A large number of countries adopt the US-based RIET model. The investors pool their wealth and focus on rental properties and leased spaces. And, real estate becomes their most significant asset class in a diverse investment portfolio.

The sales in the housing market have dropped by 11% to 15%. Recently, the property prices have also reduced by 2% to 3% nationwide. This trend is expected to continue until the end of the year 2021. The local markets with higher prices and net incomes have created a complex dynamic.

City-Wise Rankings

When it comes to global investments Dubai and New York are the leaders. Los Angeles, Hong Kong, and Sydney are next in line. However, Miami and Indian metros of New Delhi and Mumbai have failed to win the investors’ trust.

San Francisco and Singapore are still seen as a viable global destination for real estate purchases and leases. The city rankings themselves do not give a clear-cut indication. You have to delve deeper into the median property prices as well as the type of housing or leased land.

Other Key Comparisons

1. Mortgage as a percentage of income

Mortgage as income percentage is very high in India, London, Hong Kong, and Singapore. The values range from 140 to 470, indicating exorbitant costs. Dubai, Miami, and Los Angeles values are more manageable at 36 to 53. These values point to borrowing difficulties and financial hardships as well. More is the value; more is the difficulty in the process.

2. Price to Income Ratio

This is a very good measure of housing affordability in major cities. Since rents and wages are related to prices and incomes, higher affordability value is preferred. It indicates long-term viability, low financial risk, and sustainable development.

Dubai, Miami, San Francisco, and Los Angeles are faring very poorly in this matter. Sydney, New York, and New Delhi are moderately affordable at best, while the indicator is registering higher values for London, Singapore, Mumbai, and Hong Kong.

3. Gross Rental Yield

The gross rental yield percentages reveal a property’s profitability. Investors and analysts consider both centrally located properties as well as the suburbs. Hong Kong, Singapore, Mumbai, and New Delhi are at the lower end of the spectrum.

Investors recover the rents better in New York, Dubai, San Francisco, and Sydney. While London, Miami, and Los Angeles throw up multiple challenges. Those who look into all these variables will succeed in achieving higher returns on investment (ROI) in the long run.

Things to keep in mind when investing in the real estate markets

Buyers and investors have to be wary and look for the best properties. One important criterion that can influence their decisions is the global real estate value. In the last five years, Middle East and China have become dominant players. China has even surpassed the USA with assets worth US$ 42.7 Trillion.

But the USA market is still reliable as it holds onto the second position. Its total market value is estimated to be US$ 42.1 Trillion. The other noteworthy countries include Brazil, Russia, India, and Japan. European giants like UK, German, France, and Italy are more mature and reliable. But they too have to compete hard to gain the global investors’ trust.

These markets have a combined total value estimated at US$ 56.8 Trillion. This is almost 28% of the global property estimates. However, the future projected value is not sufficient to fully comprehend a specific market. You also have to look into the percentages of stock volumes that are traded.

China and Russia are on a weak footing on this significant front. Their foreign investments and economic progress have slowed down. In comparison, the mature markets of the USA, the UK, he Middle East and Germany are doing well. Their stock turnover has been registering healthy values ranging between 4% and 6%.

Industry experts list four prominent features or qualities that ensure great returns on investment(ROI):

1. Market Maturity

Properties worth millions are bought and sold around the world. Investors, traders, and agencies compete to generate billions in revenues. In such a scenario, the maturity level of the market is crucial. Political uncertainty and trade wars make Russia and China less enticing destination than the UK or the USA segments.

2. Liquidity

The top real estate countries are making their fiscal and monetary policies more attractive to the investors. They offered subsidies, mortgage relief, and temporary rental discounts. Those who can prevent liquidity shock will recover faster and regain consumer confidence in the next few years.

3. Transparent Deals

The South East Asian and South American markets are considered opaque, while the USA and Western Europe have a reputation for transparent property deals. However, countries like India are becoming more reliable in the global context. But China and Russia are still viewed with a lot of circumspection and suspicions.

4. Market Strength

Strength is determined by the real estate developer’s market value. China has a lead over India in this aspect due to consolidation. But, the mature economies of the USA and Europe are still very resilient. Yes, property prices shot up in New York and Miami, but the demand will grow.

Conclusion

The above analysis along with the comparison chart comes handy when it comes to deciding whether to invest and where to invest in real estate domain.

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