New York property is “one to watch” according to the luxury property firm Savills, after years of slippage in the world cities price league tables. Meanwhile, in the second half of last year, “billionaire” property in the city surged in value, and far outperformed both other cities and regular New York property.

New York property is “one to watch” according to the luxury property firm Savills, after years of slippage in the world cities price league tables. Meanwhile, in the second half of last year, “billionaire” property in the city surged in value, and far outperformed both other cities and regular New York property.

Savills' World Cities Index, which compares an “executive unit” of real estate across global cities, places Hong Kong in the top spot, with a cost index of 219 (average = 100). Hong Kong is followed by London and Paris, with scores of 128 and 122 respectively. Further down the table is New York, the only US city to make the top ten, with a score of 67.

New York’s slipped status

What is more remarkable, however, is the growth rate registered in the five-year period to June 2011 in New York: it is just 7 per cent. This is notably lower than any other city in the table, with the second-lowest growth rate over the period being registered in Sydney, at 28 per cent.

To pit this against how other property hotspots have performed over the period, Mumbai has clocked up eye-watering price increases of 154 per cent, while Shanghai has registered growth of 143 per cent. As a result of this, New York has slipped from fifth place in 2005, to eighth place last year.

Yolanda Barnes, director of residential research at the firm, said it was a “big story” how the status of property in the city had shifted, as the country had been so hit by real estate woes broadly. Although the luxury market, of which there is a concentration in New York, was buffered to an extent from other real estate, the low growth in the city suggests there was significant contagion.

As a snapshot of this, and putting aside large regional variations, home prices dropped 34 per cent in the US from 2006 to their low-point last year, according to figures from the Economist.

But where does that leave the Big Apple now? In the last six months of last year house prices rose 2 per cent, correcting first half year falls, according to Savills.

Data suggest underlying demand in New York is there, says Barnes, as rental yields in the city are the highest of all the cities in the table, at 6.9 per cent gross of capital value.

“We think that this measure makes New York look good value. Underlying demand is strong – as evidenced by rent levels, and capital values are low by international standards, providing attractive income levels,” said Barnes.

She added that there was more scope for capital growth in New York than in “new world” cities, where yields are very low by world standards.

“Billionaire” property

Honing in on super-prime property, this rose the most in New York in the second half of last year of all ten cities, with gains of 16.7 per cent. This was after a completely flat first half of the year. Singapore also experienced robust “billionaire property” growth in H2, at 14.2 per cent, while these luxury properties lost ground over the six-month period in Tokyo, Sydney and Hong Kong.

A global context

In the last six months of last year, broadly speaking, “old world” cities outperformed “new world” cities, with these two groups registering growth of 1.4 per cent and 0.7 per cent respectively.

This reverses a five-year trend: in the five years to June 2011 “old world” growth was 23.3 per cent, compared to 78.4 per cent in the new world. However, this performance came at a price of volatility, said Barnes, which meant that wealth being created in the East was now travelling west to prop up prices there.

The popularity of real assets

From a high net worth investor perspective, the latest data is particularly of interest owing to a renewed interest in real assets broadly.

In a recent survey by the Institute of Private Investors, many investors revealed a bullish sentiment towards tangible assets such as gold, land and artwork.

In IPI’s latest Family Performance Survey ultra-wealthy investors appeared to be veering away from the US stock market in favor of both alternative investments and international stocks. Surveyed investors reported plans to increase their allocation to commodities this year (48 per cent), as well as real estate (45 per cent).