Savills’ report named Tokyo the number one city for investors looking for above-gilts income from residential real estate, even higher than New York.
Why residential property? Because according to the research, in the world’s leading cities, rents in the residential sector out performed office rents in the first six months of 2013. Low-yielding cities, where house prices are not underpinned by rental income, though, could be overvalued, the report warns.
Manhattan was named as a good buy for investors on the hunt for income, with capital growth predicted to reach 30 per cent in the next three years. Paris ranked third for income, ahead of London in fourth place.
Japan’s capital, though, was the surprise favourite, as rental yields compare very favourably to the returns on government bonds. Indeed, New York now boasts the strongest gross residential yields of 6.2 per cent vs US government bons (3.4 per cent), while rents rose 2 per cent in the first half of 2013. Moscow, on the other hand, has gross rental yields of 5.8 per cent, but the government bonds offer returns of 7.4 per cent; a 1.6 per cent downside against gilts, compared to New York’s 3.6 per cent upside.
The “net of gilt” measure illustrates how out of synch with underlying occupier demand residential property values are, argues Savills, as well as highlighting the best places for investors to put their money.
“We tipped New York as a ‘buy’ last autumn, and the city’s residential real estate continues to appear a sound investment both for income and capital growth potential,” comments Yolande Barnes. “Tokyo now looks a surprise but convincing ‘buy’ for investors, offering a gross yield at +3.9% over government bond rates. By contrast, Mumbai is unlikely to see substantial investor activity in the near term, combining negative rental growth with pitifully low ‘net of gilt’ yields.”
Other property investment news this week:
Nigerian property boom “only for brave”
Nigeria’s property boom is “only for the brave”, according to experts.
Nigeria’s real estate is thriving at the moment as the country’s population reaches 170 million people in need of housing. An expanding middle-class combined with urbanisation marks the city out as a “perfect storm” for investment, London equity firm Actis tells BDLive .
Indeed, a successful property investment in Nigeria can see returns as high as 35 per cent. But a lack of information on regulations in rural areas, corruption and a lack of financing means that the market is a risky option for investors.
Ski resort sells half of its properties in a week
A ski resort in resort has sold half of its units in just a week.
The Alpe d’Huez resort came onto the market earlier this month but within a week had sold 50 per cent of its properties to French buyers. The opportunity, managed by Sextant Properties, has a range of occupancy options and competitive prices, promising 4.5 per cent yields on investments – a strong enough package to entice local buyers. Will it do the same for the Brits?