London is no longer the most expensive city in the world for prime properties, following a dramatic 17% fall in house values in the last year. But the Fitzrovia area of London is the world's most attractive up-and-coming prime location, according to a report on international prime residential properties.
Monaco is tops - for price
Monaco properties are now substantially more expensive than those in London. Homes in Monaco on average command prices of €55,000 per square metre, compared to €28,000 per square metre for prime properties in London. Manhattan is third, at €16,500 per square metre.
But the Prime International Residential Index, published in the Knight Frank/Citi Private Bank Wealth Report, says that London remains a city of considerable attractions. London is listed as the number one global city, ahead of New York. London is rated above all other major cities in the listing for knowledge and influence, is number two (behind New York) for economic activity, is third for quality of life (after Toronto and Paris) and is fourth for political power (behind Washington, New York and Brussels).
The high ratings for London suggest that prices for prime properties will once again rise once the global economic crisis starts to ease.
Even the richest are suffering
Liam Bailey, head of residential research at Knight Frank, says: "Even the world's richest people have cut their discretionary spending and the most desirable prime residential property markets have now been affected by the global downturn."
London suffered the third sharpest fall in property values in prime locations, according to the report. The biggest price collapse was in Hong Kong, where prices dropped by a quarter in a year. House prices fell by nearly 20% in England's Home Counties.
London will bounce back
Bailey believes that both London and New York will return to the top of desirable locations for prime properties in the coming years. "Despite being hit hard by the credit crunch, London and New York are likely to retain their global status in the future because they offer their inhabitants such a unique combination of attractions that some of the emerging Asian financial centres like Dubai may struggle to match," explains Bailey.
However, some Asian cities have shown strong growth in residential property prices over the last year. Bangkok saw the biggest prime house price increase last year - at 23% - followed by Jakarta, Bali, Kuala Lumpur and Istanbul.
Investment opportunities
There are also signs that the wealthiest intend to invest more heavily in prime residential properties, amidst the decline in values on the world's stock markets. Almost 55% of high net worth individuals surveyed for the report plan to increase their exposure to residential property over the next two years.
For those who are investing, London offers the best locations for up-and-coming prime locations, says the Knight Frank report. Fitzrovia, to the east of Marylebone, has style, convenience and a varied selection of properties. With the continuing weakness of sterling, the massive regeneration of nearby Kings Cross and the popularity of neighbouring Bloomsbury, Fitzrovia is likely to be in high demand.
Also listed in the top ten global opportunities for property investors include distressed UK properties, European real estate investment trusts (REITs) and luxury penthouse apartments in London and elsewhere.