Fame, fortune, and real estate investment have formed the world's top '12 cities.'

New York and London have been listed as leading international cities of the world in a new study called 12 Cities by international real estate adviser Savills.

Cities are classified by Savills according to their popularity and fame, as well as their economy and size; factors that will decide the cross-border investability of their real estate, as well as their current 'world class' city status. buy house in qatar

Savills' 'X-Factor' world city characterization looked at a combination of global competition, accessibility, foreign visitors, and web search data in 12 cities to assess overall world city status. Using these metrics, Singapore and Paris begin to challenge New York and London, while Moscow, Mumbai, and Rio de Janeiro are less-established leading global cities in the study's top tier of twelve.

"Our concept of a world city is focused on other less tangible considerations, not just size or economic growth," says Yolande Barnes, director of Savills World Research. "These considerations include notoriety, popularity, international scope, and investability, all of which are not disclosed solely by population and GDP statistics. These intangibles have an effect on a city's attractiveness to business and wealth generators, which has an impact on the rate of residential and commercial real estate market growth and contraction, as well as market stability."

"The global economic map is being redrawn, and this is having a direct effect on real estate markets. 'New world' economies, such as China and India, have recently seen slowed growth, while older developed economies, such as the United States, the United Kingdom, and Japan, are now recovering more quickly than many analysts predicted."

"As a result, the 'new world' cities' explosive real estate growth has slowed, and in some instances, such as Mumbai and prime Hong Kong, it has reversed. Dubai's high-growth real estate center epitomizes the depth of investment markets in emerging economies. Its resurgence is representative of a market emerging from severe price corrections following the financial crisis of 2008."

Real Estate Investment Indicators

The Savills X-Factor overall city characterization does not inherently reflect conventional economic or real estate costs and values; rather, it speaks to a world city destination's long-term stability and attractiveness. The three cities with the highest X-factor rank in the top four for residential real estate buyers, but they are also among the top four most expensive places to live and work for employees.

Savills compared gross rental income to the income available from 10-year government bonds in each country to create a 'net of gilt' yield to better understand the true appeal of residential and commercial real estate as an asset class in each city. This, they say, provides a true measure of real estate success in relation to the local risk climate.

By this metric, Tokyo offers the best returns compared to bonds, and it has begun to attract more ambitious investors who recognize the unique characteristics and risks of Japanese real estate markets. New York, too, offers some attractive gross yields, which has piqued investor interest.

Taking the temperature of the market

Savills has identified Hong Kong, Shanghai, and, most notably, Mumbai as the cities with the most vulnerable residential real estate values. New York and Sydney tend to be the markets with the most room for expansion, while residential prices in London and Dubai appear to be higher than average, especially in the cities' prime markets, but still lag behind the hottest cities.

According to Barnes, "non-prime standard housing stock is now an enticing purchase for buyers." "London's mainstream ideals seem cool on a global scale, while Dubai and Hong Kong seem to be more thoroughly appreciated. We now expect secondary and even tertiary markets in our global cities to expand faster than prime markets over the next five years."

The global rise in asset prices will inevitably decline as quantitative easing is tapered and eventually phased out. We anticipate a realignment of rental and capital development in the future.

Since bond yields and interest rates are more likely to rise in Asia than in the developed West, we expect the most stress in overstretched markets in the short term in this area.

Some second-tier cities, which are not yet included in our index of the world's top twelve cities, provide good value and may begin to gain traction with investors. Cities to watch include Istanbul, Hanoi, Kuala Lumpur, Jakarta, and Bangkok, as well as several big, second-tier cities in the same countries, according to Barnes (that few in the West will ever have heard of).

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