Research / Surveys

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Space Travel
Credit: Mike Massee/XCOR

Sub-Orbital Space Travel, Asteroid Mining Find Favour With International ‘Rocket Set’

So how have notions once the preserve of science fiction found their way into a sober document like the Knight Frank 2014 Wealth Report? After all, this is one of the most-referred-to documents in international real estate. What gives?

The latest edition of Knight Frank’s Wealth Report gives space to the rising trend for private money to finance space research. Asteroid mining really does make the list, yes, but what’s of interest more directly to property investors, owners and purchasers is the renewed focus on sub-orbital space travel.

You only have to look at the history of the American West to see how a new form of transport can utterly revolutionize the way towns are laid out. When railways came along, railway towns sprang up. A generation or two later, roads predominated and railway towns were abandoned.

Right now the dominant forms of transport are aeroplanes, and in some places high speed rail. Mostly, though, your house is worth more, your hotel attracts more investment, your square metre of land is more interesting to people in Singapore, China, Florida, London, New York, the closer it is to the airport.

What if all that’s about to change?

The map of the world that’s drawn by air connections is defined by how long it takes to get from one place to another. Distant destinations in beautiful spots are reduced in desirability because of the time it takes to reach them. But the technology exists to change that and now it looks like the will does as well.

Frank Knight has identified over 70 individuals with a net wealth of over $200bn, who are targeting sub-orbital space transport as an investment opportunity. The appeal of sub-orbital is that allows for very very fast transport times. By taking a plane into the upper atmosphere where drag is less, and by using the Earth’s own gravity as part of the propulsion system, sub-orbital planes could achieve velocities in excess of 4,000 miles per hour, slashing transport times around the world to a few hours at most.

Currently, it takes 21 hours to fly from London to Sydney. In a sub-orbital plane, that could be cut to 2 hours 10 minutes – the kind of time we associate with short hops within a country or from one European neighbour to another, not to fly around the world.

The results could reconfigure the world property investment map.

Currently, one of the reasons for London’s popularity is that, compared to New York, it’s far more accessible for Middle Eastern, African, Russian and European investors. But when those investors can get to New York from Moscow in an hour, They might prefer the taste of the Big Apple. When it takes just 1 hour 30 minutes to fly from Dubai to Vancouver, Middle Eastern investors might begin to think that dolphins, scenery and easy access to Seattle and Silicon Valley trump an NW postcode.

The technology to achieve sub-orbital flight has been available for some time, and there are embryonic commercial concerns like Richard Branson’s Virgin Galactic waiting in the wings. The knock-on effect of a technology that does to jet flight what jet flight did for sea transport is hard to see with any level of detail, but with $200bn on the launchpad it’s not a question of if; it’s a question of when.

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Swiss-franc-on-Swiss-flag

The economies of the world’s nations are ranked by the World Economic Forum (WEF) in terms of how competitive they are, releasing the results in a yearly Global Competitiveness Report. The Forum attempts to map out which of the world’s economies are most competitive and this year’s report contains more countries than ever before, offering data on 142 economies and thus remaining the most comprehensive document of its kind in the world.

But the report defines competitiveness in vague terminology.  Unfortunately, crisply definable figures like GDP or unemployment figures can’t give a clear idea of a concept like competitiveness. The report’s authors define competitiveness as ‘the set of institutions, policies, and factors that determine the level of productivity of a country’ and go on to explain that there are twelve ‘pillars of competitiveness:’ Institutions, Infrastructure, Macroeconomic Environment, Health and Primary Education, Higher Education and Training, Goods Market Efficiency, Labour Market Efficiency, Financial Market Development, Technological Readiness, Market Size, Business Sophistication, and Innovation.

While it’s obvious that complex, dynamic concepts require multiple inputs – the reasoning behind using the quality-of-life index rather than simple GDP/person type economic measurements in assessing how genuinely prosperous a nation is, for instance –  the report sometimes seems to fall into the trap of defining one nebulous concept in terms of another. The section explaining the Ninth Pillar, Technological Readiness, begins with the words, ‘in today’s globalized world,’ a phrase calculated to imply that the author has run out of things to say while there is still some paper left.  The odd fragment of waffle notwithstanding, the authors go on to make a serious attempt to define the way technological readiness contributes to an economy’s competitiveness. They stress the importance of ICT, referring to Manuel Trajtenberg’s concept of a ‘general purpose technology’ (like the steam engine) which comes to organize economic activity around itself.

The report works hard at being taken seriously, referencing scholarly works and crunching large amounts of data on economies grouped geographically, so that the Middle East and North Africa get a chapter to themselves. But what does any of this mean for Switzerland? Can we expect a world in which the dollar is replaced by the Franc, and everyone is seriously punctual in at least two languages?  Is Switzerland poised to replace the US as the world’s ringmaster?

The report itself explains that this is unlikely. For one thing, the Swiss economy remains tiny at the side of the US: its per capita GDP might be higher, at US$67,000 against the US’s US$47, 000, but that’s shared out among a much smaller population: 7.6 million Swiss aren’t going to out-produce 317 million Americans any time soon, no matter how good they get at it. The Swiss economy makes up 0.44% of the world’s total economic activity: disproportionate to population, maybe, but dwarfed by the 20% the US makes up.

Competitiveness is a measure of the quality rather than the size of an economy. The report aims to show which economies will perform better and offer nations the chance to learn from each other, as well as track general improvements in economic performance worldwide. So Switzerland’s ascension isn’t something for other nations to worry about straight away.

Of the top ten most competitive economies, six (or five if you don’t count the United Kingdom) were in Europe, and of the remainder three are Asian and the other is the United States.  High levels of prosperity are confined to the same areas of the globe as in previous reports, but gaps are narrowing and widening in unexpected areas. The possibility of the first sovereign defaults since the 1940s has contributed strongly to a widening between the chances of Europe’s member states: Greece languishes in 96th place. Meanwhile higher economic growth rates in Africa – an average of at least 5% with some nations putting in over 6% – mean that even nations that don’t make the podium are moving ahead faster than the advanced economies.

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The Knight Frank Global House Price Index Q3 results have confirmed that the annual house price growth, except in Dubai has slowed from the June Q2 report of 4.8% to 3.8% in the third quarter.
With the US and Latvian market remaining at the bottom of the index, the UK is also spiraling towards the bottom. Average prices fell by 0.3% on a quarterly basis and more than half of all countries showed quarterly price falls, with one third now also showing annual price drops.

It is clear that every country in the world is more or less affected by the global credit crunch. An alarming concern is also the fact that prices fell in half of the lists countries during the third quarter of this year.

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larget-transparency-score-changes-2006-2008.jpgThe latest Jones Lang LaSalle Real Estate Transparency Index has been significantly enhanced. According to the report, it is clear that overall transparency has clearly improved since the last survey in 2006.

27 out of a total 56 markets have improved their score and out of those, eight countries moved up one full transparency tier.

Overview

The biggest transparency improvements were found in Dubai, Romania, Ukraine, and Russia. Venezuela is the only country overall whose transparency is lower this time around. On average, Europe’s transparency is higher than in the regions of Africa and the Middle East.

The biggest improvements seen this year were in Vietnam, China (PRC) and India.

Africa’s and regions in the Middle East attract more global attention from property investors which brings the transparency issue to the forefront of the regional governments agendas.

In Latin America it was Panama and Brazil that received the largest transparency overall.

Asia Pacific

The 2008 transparency survey included sixteen countries in a Asia Pacific region. A first time inclusion was Cambodia. Some of the worlds shiniest beacons are included within this region, such as Australia and
New Zealand. The least transparent countries are Vietnam and Cambodia.

gum-shopping-arcade-moscow-russia | credit:EffervescingGUM Shopping Arcade: Moscow’s most exclusive shopping mall

Mercer have just released their new list on the cost of living in cities around the world. If you remember, we blogged about their list last year in the Mercer Global Cost of Living Survey.

There have been some interesting changes although the top position for most expensive city in the world has once again been awarded to Moscow. If this is too much of an expensive market for you, you can always escape to Asuncion in Paraguay as the cheapest. The top ten places on the Mercer survey are clearly dominated by European and Asian cities.

The major blame to the changes and shifts in the rankings can obviously be attributed to the weakening of the US dollar. In total, the survey covers 143 cities across six continents, measuring the comparative costs of entertainment, household goods, housing, food, transport, clothing and more (200 each).

The 2007 Coldwell Banker Previews International Luxury Survey has now been published and portrays a remarkable degree of optimism among respondents with regard to their own stake in the US’s real estate market. A surprising 56% of those surveyed are expecting the value of their homes to increase in the next 12 months and 10% expect the increase to be significant. Over a five-year term, 58% expect values to rise and 36% expect them to rise significantly. The survey press release doesn’t define what’s deemed to be a ‘significant’ increase in value. Nor does it let on what the percentages were for people expecting their home’s value to plateau, to fall or to fall significantly.

The latest Mercer ranking of cities by cost of living places Moscow, London and Seoul in first, second and third place. Mercer’s own analysis of the rankings gives prominence to changes in exchange rates, and particularly, the fall in the value of the dollar, as the chief ‘motor’ for moves up or down the list. However, in the case of London the change from 5th place in 2006 to second this year is also ascribed to higher property rental costs. Of course, transport costs for London residents are another factor helping the city up the scale. Glasgow (up from 60th to 36th) and Birmingham (up from 69th to 41st ) are among those cities to have moved furthest.

For a true appreciation of what changes in rankings mean for people on the ground it’s important to be aware of developments in Mercer’s benchmark city, New York. The benchmark itself does not remain static; New York housing costs are reported to have risen by an average of 6.5% in the course of 2006. In the US, the consumer prices index rose 3.23% in 2006 and the rise in the 12 months to March (when the Mercer survey was conducted) was 2.77%.

These increase in New York costs of living need to be borne in mind when considering Mercer’s cost of living indices for other cities (which are all relative to New York). So far the serious softness in much of the US housing market does not appear to be showing up in Mercer’s figures.

Although a cost of living survey is necessarily a somewhat blunt instrument for accessing real estate in the different cities covered, the Mercer report does throw up some interesting contrasts, nevertheless. Focusing on places covered by Overseas Property Mall in the last few months, it’s interesting that Bratislava is not only more expensive than Prague again, but costs of living there have risen considerably more sharply in the last year.

Berlin continues to be slightly cheaper than Munich or Frankfurt though all three have risen up the table as a result of the increased rate of exchange for the Euro. Sofia is Europe’s least expensive city (ranked 108th). Athens, Barcelona and Madrid, also affected by the Euro’s rise, have all risen a long way up the table in the last year.

Outside Europe, Dubai and Abu Dhabi have both slipped down the table a little. Does this reflect a measure of stability in property prices and rents in the UAE? Interestingly, Dakar in Senegal is higher up at 33rd with a substantial increase in its cost of living index. However, this is probably mainly a reflection of the fixed exchange rate the CFA franc enjoys with the Euro.

Finally, it is worth remembering that Mercer’s methodology is based on the similarities in spending patterns among people in middle and higher income brackets no matter where they originate from. The rankings are of limited value to those relocating themselves, say as a matter of lifestyle choice, who are happy to do as the Romans do when in Rome.

Mercer Human Resource Consulting

Cost of Living Survey – Worldwide Ranking 2007

(including housing)

Top 50

Base City: New York, USA (=100)

Rankings

Cost of Living index

March 2007

March 2006

City

Country

March 2007

March 2006

1

1

MOSCOW

Russia

134.4

123.9

2

5

LONDON

United Kingdom

126.3

110.6

3

2

SEOUL

South Korea

122.4

121.7

4

3

TOKYO

Japan

122.1

119.1

5

4

HONG KONG

Hong Kong

119.4

116.3

6

8

COPENHAGEN

Denmark

110.2

101.1

7

7

GENEVA

Switzerland

109.8

103

8

6

OSAKA

Japan

108.4

108.3

9

9

ZURICH

Switzerland

107.6

100.8

10

10

OSLO

Norway

105.8

100

11

13

MILAN

Italy

104.4

96.9

12

12

ST. PETERSBURG

Russia

103

99.7

13

15

PARIS

France

101.4

93.1

14

17

SINGAPORE

Singapore

100.4

92

15

10

NEW YORK CITY, NY

United States

100

100

16

18

DUBLIN

Ireland

99.6

91.8

17

24

TEL AVIV

Israel

97.7

89.7

18

21

ROME

Italy

97.6

89.8

19

21

VIENNA

Austria

96.9

89.8

20

14

BEIJING

China

95.9

94.9

21

19

SYDNEY

Australia

94.9

91.3

22

25

HELSINKI

Finland

93.3

87.8

23

36

STOCKHOLM

Sweden

93.1

84.8

24

27

DOUALA

Cameroon

92.9

87.6

25

41

AMSTERDAM

Netherlands

92.2

83.4

26

53

MADRID

Spain

92.1

81.6

26

20

SHANGHAI

China

92.1

91.2

28

21

KIEV

Ukraine

91.4

89.8

29

59

ATHENS

Greece

90.6

81.1

30

52

ALMATY

Kazakhstan

89.6

81.9

31

56

BARCELONA

Spain

89.2

81.2

31

48

BRATISLAVA

Slovak Republic

89.2

82.4

33

45

DAKAR

Senegal

89

82.8

34

25

DUBAI

United Arab Emirates

88.8

87.8

35

45

ABIDJAN

Cote d’Ivoire

88.3

82.8

36

60

GLASGOW

United Kingdom

88.1

80.7

37

31

LAGOS

Nigeria

88

85.5

38

15

ISTANBUL

Turkey

87.7

93.1

39

61

MUNICH

Germany

87.6

80.2

40

61

FRANKFURT

Germany

87.4

80.5

41

69

BIRMINGHAM

United Kingdom

87.2

79.7

42

29

LOS ANGELES, CA

United States

87.1

86.7

43

56

LUXEMBOURG

Luxembourg

87

81.2

44

70

BRUSSELS

Belgium

86.5

79.5

45

30

ABU DHABI

United Arab Emirates

85.9

86

45

72

BERLIN

Germany

85.9

79.2

45

62

DUSSELDORF

Germany

85.9

80.4

48

28

TAIPEI

Taiwan

85.8

86.8

49

50

PRAGUE

Czech Republic

85.6

82.1

50

51

ALGIERS

Algeria

85.1

82

Global house prices continued to rise rapidly in 2006, but at a slower pace than in 2005. Northern Europe leads the house price boom.

Leading the charge was Estonia with an impressive 54% house price increase in 2006. This followed average dwelling price rises of 57% in 2005, and 25% in 2004 (see table).

Estonia was followed by Denmark which experienced 23% house price rises in 2006, then by Norway (14%) and Ireland (13%). Other countries in northern Europe also had impressive house price increases, including Sweden, UK, and Finland.

Early indicators suggest that Latvia’s strong house price growth will continue in 2006, following 27% house price rises in 2005. This will be verified as soon as official statistics come in.

Outside Europe, South Africa, 2004’s star performer, continues to experience strong house price growth, with 2006 house price rises of 12.7%. However, this is a far cry from the 33% increases recorded in 2004, and the 17% rises of 2005.

Countries attracting immigrants are also experiencing strong property price increases, particularly Canada (11%), New Zealand (10%) and, to a certain extent, the US (8%) and Australia (6.5%).

Central Europe lags behind

Southern Europe, the favorite destination of second home buyers and holidaymakers, is also experiencing strong house price increases.

France experienced a 12.5% house price increase from 3Q 2005 to 3Q 2006, while Spain registered a 10% rise in 2006 and Italy 6.6%. However property prices in Portugal dipped marginally (-0.4%), following a lacklustre recent past.

Austria’s housing renaissance continued, with 6.8% price increases in Vienna, after 8% price rises during 2005.

Most countries in Central Europe, however, remained unexciting. 2006 saw very small price increases in Switzerland (2.9%), Luxembourg (2.9%), Germany (2.8%) and Poland (2.2%).

Philippines leads Asia

The Philippine real estate market registered the highest price growth in Asia during 2006 at 11.6% (Philippine property prices had dropped most after the 1997 Asian Crisis).

Indonesia’s house prices rose 8.76%, from 3Q 2005 to 3Q 2006. However Indonesian inflation was high in 2006 at 13%, so in real terms Indonesian house prices actually fell.

Singapore’s residential property price index rose 7.6% y-o-y to 3Q 2006, the city state’s highest price increase since 2000.

Malaysia and Taiwan are still muddling through, and saw only marginal price increases of 1.4% and 1.1%, respectively.

The previous strong house price growth in Thailand during 2004 and 2005 came to an end, as the political crisis spilled over to the economy, and 2006 saw house price falls of almost 1%.

Japan has not seen the end of more than a decade of property price falls. Commercial property values are rising in Tokyo and some major cities, but in the rest of the country property prices are still static.

The global property boom is slowing

Many more countries experienced nominal house price increases in 2006, than price falls. Yet the pace of housing price increases in 2006 was generally down on 2005.

Several countries experienced quite significant slowdowns in their housing markets, without seeing actual price falls. Countries in this category, where the price rise rate dropped by more than five percentage points, include Poland (6.6 percentage point reduction on previous rate of house price rise), US (5.6% reduction on previous rate of house price increase) and New Zealand (5.02% reduction on 2005’s price-rise rate).

However, US house prices showed no actual decline in 2006, either during the year, or from one quarter to the next, according to the OFHEO house price index, despite some press reports to the contrary.

It is tempting to attribute the slowdown in many countries to interest rate rises, especially in Europe and the US.

However, other forces came into play in some countries. Israel (typically not included in most ‘global’ house price reports) experienced price declines in 2006 (-4%), after a recovery in 2005. The price fall can be attributed to the war with Hezbollah in Lebanon, and other political troubles.

The dramatic upsurge of Hong Kong property prices in 2003 and 2004, and sudden cooling down in 2005 and 2006, also deserve a better explanation than the usual speculative bubble theory.
Description
The Global Property Guide is a research publication and web site (http://www.globalpropertyguide.com) for the high net worth investor in residential property.

Timeshare and shared ownership properties have been endorsed by a major new study undertaken across the region.

Revealed for the first time at today’s exclusive conference at Dubai’s icon of hospitality, the Burj Al Arab, the symposium included 18 presentations and panel discussions covering every aspect of the leisure real estate market.

Commissioned by RCI Middle East, part of the world’s largest holiday exchange and rental travel group, RCI Global Vacation Network, the research findings formed the basis of a programme that attracted an audience of high profile executives from around the world.

Stephen Holmes, Vice Chairman of Cendant Corporation, parent company of RCI, provided the keynote address, along with Awadh Al Ketbhi, Director of Conventions at Dubai’s Department of Tourism and Commerce Marketing.

The research focused on the burgeoning Arab tourist market and the holiday preferences of Arab travellers. More and more of them are expressing a preference to holiday within the region and this survey is essential reading for all those involved in the local hospitality and leisure sectors.

Fieldwork was undertaken during March across a sample of nearly 1,000 high-earning nationals from Saudi Arabia, Kuwait, Iran, Egypt and the UAE. Undertaken by the Pan Arab Research Centre, (PARC), the face-to-face interviews were analysed and edited by NorthCourse Advisory Services, a member of the Cendant group that provides comprehensive consultancy and turnkey solutions for prospective developers around the globe.

The research revealed that the concept of shared ownership products is ideally suited to the higher income Middle Eastern national. Also, that many Saudi and UAE nationals are more inclined to consider buying a timeshare property over and above other options. Longer stay purchases, known as Fractional Ownership, typically involving a share of a larger number of weeks rather than just one or two, were also a major preference, especially amongst Kuwaitis and Egyptians.

The study demonstrated that the entire sample travels regularly and that holiday choices are largely based upon destinations that offer good family solutions and shopping rather than activity and adventure tourism. Food and fine dining is definitely high on the agenda for all respondents in the survey.

Topics of particular focus during the research were 4 leisure travel options – family holidays, religious travel, big trips and festive travels; the clear leader is family holidays. Many travel in larger groups, with extended family, friends and household staff; the larger, luxurious type of accommodation found within shared ownership developments, can fulfil these requirements perfectly. Notably, 40% of Saudi Nationals take household staff away with them, and 46% of UAE Nationals take their parents.

Dubai and the UAE as a whole are the most popular destinations for all nationalities, especially when considering a timeshare purchase. The potential is significant – the Middle East market alone could support USD$540 million in annual timeshare sales. With regard to fractional ownership, the most attractive locations were Dubai, Sharm El Sheikh and Makkah. Although this is a smaller market in terms of volume, gross annual sales are estimated at USD $642 million, greater than for timeshare due to higher-value properties. Another exciting new shared ownership product is religious timeshare, which has received an extremely positive response amongst Muslim communities across the globe, who all have a common interest in travelling to Makkah.

These findings clearly demonstrate the major potential for shared ownership developments within the Middle East, where to date construction within the Gulf region exceeds USD$1 trillion, according to MEED reports. Within Saudi Arabia the value of new projects has doubled to more than USD$200 billion in the last 12 months.

Vivienne Noyes-Thomas, Managing Director of RCI Middle East, commented ‘today’s symposium is a unique forum packed with ground-breaking information for all those with an interest in property development, hospitality and sales. With close on 150 delegates from 15 different countries, it has drawn substantial interest from developers, government organisations and the entire leisure real estate industry.’

Other topics covered by speakers from the US, Europe and Asia at today’s symposium included The New Generation of Luxury Timeshare, Condo Hotels and Buy to Use and Let property models. Spanish tourism marketing expert Euologio Bordas set the background with a review of Global Tourism Trends and Shared Ownership within the ‘Dream Society’. Key business leaders from the local community – including Elaine Jones, CEO of Asteco, James Wilson, CEO of Nakheel Hotels and Resorts, Patrick Smith, VP Asset Management for IFA Hotels and Resorts – examined the opportunities for these new business models in the regional property and leisure development marketplace.

Source: AME Info