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Newsletter 11/2014

Industry insights | Final Global Real Estate Outlook - 2014


This report identifies a growing global trend among property investors: the flight from traditional prime city centre investments to up-and-coming districts on the city fringe offering greater value and returns.

UK: Outer London boroughs showing 12.1% y-o-y growth, compared to growth of 8.1% for Prime Central London properties

USA: New lease signings in Brooklyn are up 72% on last year, while for Queens lease signings quadruple as of August

Australia: Lifestyle destinations Melbourne and Brisbane projecting up to 9% growth for fringe city centre fringe neighbourhoods in 2015


London retains its global property market safe haven status as Prime Central London prices continue to offer stable and profitable returns for investors, with 8.1% price growth year-on-year. However, the best returns for investors can now be found in the Outer London boroughs which have seen rises of 12.1% over the same period.

Paul Preston, Director and Head of IP Global Middle East commented: “There’s a ripple effect that’s pushing buyers out of London’s high-priced prime central areas and towards its outer boroughs and satellite towns. These locations are becoming more accessible to commuters with new significant infrastructure improvements, such as the Crossrail network, which is driving demand and prices. Consequently, we expect to see price growth of up to 19% in the areas surrounding the Crossrail route, such as Ilford.”

The Slough property market story is a great example of this trend. As a town on the western fringe of Greater London with a thriving economy and excellent links to London and Heathrow airport, which will only be further enhanced with the arrival of Crossrail in 2017, Slough has enjoyed price growth of 12% in the year to summer 2014.

There are strong signs that this will continue to accelerate, given transaction numbers are up 118%. Paul Preston added “IP Global’s first Slough investment launched in August to wide interest, securing over GBP 17 million from both local and overseas property investors, with 95% of units sold in less than three weeks.”


Moving Stateside, it’s a similar story in New York. The greatest returns for property investors are now often found outside of Manhattan. The median sale price for Manhattan edged up just 0.8% year-on-year in Q2, whereas new lease signings in Brooklyn are up 72% on last year and in Queens have quadrupled as of August, indicating how in demand these areas are becoming.

Paul Preston remarked “IP Global has a strong track record in New York. Just last week our preferred property management partner, sold a unit at The Sheffield, located just a couple of blocks south of New York’s Central Park, providing the client with a 35% gross profit in just three and a half years. However, opportunities for such rapid price growth in Manhattan are more few and far between. As such, our New York strategy focuses predominantly on sourcing investments in parts of Brooklyn and Queens where the ripple effect creates significant upside potentials in both the sales and rental markets.”

Property markets in major cities outside of New York contrast the flight scenario however. In Chicago, investors can find great value in the city’s CBD, the Loop, an area with a substantial residential undersupply and increasing levels of liveability. Similarly in Miami, a city which has seen 32 consecutive months of price growth led by equity funding rather than debt, which led to the market’s demise after the 2007 property boom, has seen the Downtown condo market surge 13.8% year-on-year in Q2, compared to the city median (excluding Miami beach) condo price of 8.7% over the same period.


Meanwhile, in Melbourne, the property market is buoyant on the back of the city’s overall growth and residents are arriving in their droves. The number of Greater Melbourne residents is on course to double by 2015 fuelled by a strong local economy and the city retaining its title of “World’s most liveable city” by the Economist Intelligence Unit for the fourth consecutive year.

Again, as with London and New York, city fringe parts of the city can offer investors higher growth than the projected 5-9% growth for 2015. This is also the case for Brisbane, where IP Global’s investment strategy is centred around the Newstead/Fortitude Valley areas, a part of the city that is seeing extensive investment and redevelopment work.

Paul Preston commented “Interest in Brisbane has been high among both international and domestic investors, driving AUD39 million of investment in IP Global’s Broadway on Ann and Newstead Towers projects in the city this year.” Positivity continues to mount around the Brisbane market this year as the city joined Melbourne and Sydney in the top 25 of Monocle’s worldwide ‘Quality of Life’ rankings for the first time. Home prices that have been on a long-term upwards trend with nine consecutive quarters of growth, continue to rise with the market seeing average growth of 7% in the year to June 2014. Despite the price rises, Brisbane is still among Australia’s most affordable capital cities.

EXPLORING POTENTIAL - other markets that investors should keep an eye on:

In Europe this includes Edinburgh, with its undervalued property and five year price growth predicted to be 25%; Manchester, which is undergoing a period of strong economic activity; and Berlin, with a growing population driving demand beyond supply, increasing prices by 9% this year.

In Australia, Sydney, with its AUD 3 billion decade-long programme of infrastructure improvements, is worth and in Asia, Tokyo with its stable national economy and a weakening currency favouring international investors.

Access the full report here

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