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123: Super cities: which ones to watch out for


03-11-2007

PropertyInvesting.net team

 

This special report gives valuable insights into the super cities of the future – huge global metropolises that will come to dominate the global economy and property investment markets. Some cities will gain in prominence whilst some will diminish relatively. All will expand – but some at a far higher pace than others.

 

Property and land values tend to increase as land shortage increases, wealth increases and infra-structure and services increase. Hence in the middle of cities, land is normally the most expensive as are commercial and residential property prices. This is because of the large demand from businesses, employees and wealthy individuals. If a city’s population grows and it’s per capita wealth increases – the property prices increase. So the simple trend is - the closer into the key commercial and residential centres with the best infra-structure and services - the higher the property prices. Historic and cultural centres with pleasant property also command high prices. So in London for instance, the West End is very expensive because of it’s huge offering of services (shops, theatre, stations, hotels), shortage of land, culture, infra-structure links and it’s historic and pleasant architecture. The City of London area is also very popular – mainly for commercial office property but also for corporate apartments. This city model can be used in other cities around the world.

 

The big new cities of the future will be:

 

·          Buenos Aires

·          Istanbul

·          Shanghai

·          Ho Chi Min City

 

To focus investment on the central locations of such cities, in anticipation of the boom and expansion in these cities is worth considering for all serious property investors who invest internationally.

 

Current large cities that will continue to expand at a reasonable pace are London, Los Angeles and Tokyo. Cities that are due to decline in relative importance are Berlin, Paris and Rome as population growth is far lower, growth economic activity less pronounced and in some cases, population tails off (e.g. central and southern Italy).

 

These cities will tend to attract the more knowledge based companies and private enterprises – which will stimulate economic expansion and put pressure on land leading to increasing property prices. They will be focus areas for entrepreneurs, hi-tech start-ups, private equity and venture capital. Their growth rate will likely run at double or more the average country areas. Property prices would follow a similar trend, albeit not quite proportional to GDP growth (ref: wealth will also be distributed into property in country areas – second homes and holiday homes).

 

Capital City Government Employment: The capital cities have the bulk of senior civil servant and political jobs in most countries, which have a positive knock-on impact on wealth, employment and subsequently house prices. Good examples are in the UK - how Cardiff and Edinburgh house prices shot up after they had their own parliaments and country governments in Wales and Scotland respectively. Luxemburg, Strasburg and Brussels have benefited hugely from EU government jobs – this is likely to continue. The demographics of Luxemburg are very favourable – price are likely to stay strong for many years – Luxemburg also benefits from banking and it has the highest per capital GDP wealth of any country Europe.    

 

Western Services sector: This is where the jobs growth in most “western” economies will almost certainly come from in future years, unless there is a massive banking/services downturn caused by something like a stock market crash.

 

·          UK: Areas particularly well exposed to wealth from banking and services are all southern and south-western areas, towns and cities – with the focus being on London. Other smaller services centres are Edinburgh, Leeds, Manchester and Cardiff.

·          USA: New York, Los Angelese, San Francisco - Silicon Valley, Miami, Denver, Phoenix.

·          Holland: Amsterdam

·          Canada: Toronto, Montreal

·          France: Paris

·          Germany: Frankfurt

·          Africa: Cape Town, Jo’burg, Cairo

·          Spain: Madrid

·          Italy: Milan, Rome, Florence

·          Switzerland: Geneva

·          Austria: Vienna

·          Slovakia: Brataslava

 

Eastern Manufacturing and Services Sector: In Eastern economies such as China, India and Indonesia (Far East) the main jobs growth in the next ten years is likely to come from manufacturing. Slowly but surely the services sector jobs growth with accelerate to support the growing manufacturing sectors. Super cities will develop that ave both strong manufacturing and services sector growth. Example of future super cities are:

·          India: Mumbai, Bangalore, New Delhi

·          China: Shanghai, Hong Kong, cities in Guangdong province, Xijang

·          Vietnam: Ho Chi Ming City

·          Indonesia: Jakata

·          Japan: Tokyo, Osaka, Kobe

·          Korea: Seoul

·          Russia: Moscow, St Petersburg

·          Singapore: Singapore

·          UAE: Dubai

·          Saudi: Riyadh

·          Qatar: Doha

·          Pakistan: Islamabad

·          Bangladesh: Dakar

 

How to benefit: If you do further research on these cities – you’ll probably find a city that has undervalued property, exceptional growth prospects, and a stable political and risk profile. Property investment in international cities which you are not familiar with always has a higher risk profile – because of the chance of being taken advantage of, or not knowing legal and tax issues thoroughly enough. But logic dictates that the cities such as Bangalore, Ho Chi Ming City, London and Luxemburg have all the right ingredients going for them – massive population growth, hi-tech and banking services, wealth growth, shortage of land and relatively stable political outlook. China is also an obvious opportunity. For the more adventurous, Mongolia is also worth considering (mining boom and proximity to China will benefit this country – prices are very low at present).  

 

 

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