Prime Property Leads Real Estate Revival

While we continue to be informed about the gradual recovery of the world's property markets in the wake of the global economic crisis, investors are beginning to look for the most worthwhile sections for achieving long-term growth....

While we continue to be informed about the gradual recovery of the world's property markets in the wake of the global economic crisis, investors are beginning to look for the most worthwhile sections for achieving long-term growth.

This week saw estate agent Knight Frank announce that the real estate market in Edinburgh is showing remarkable signs of recovery, with prime properties in the New Town and West End regions leading the way in terms of growth so far this year.

According to the report, the value of prime residential properties, worth over �1 million, rose by almost three per cent during the first half of 2010 compared to last year.

However, rather than being confined to one country, the news is reflective of a trend which can be seen around the world, with an increasing number of markets being further strengthened and entering recovery as a result of a return of high-end buyers.

"Values are by no means recovering across the board and are still some way below the levels seen prior to the credit crunch," Mathew Munro, head of Edinburgh city sales at Knight Frank, said. "But some sectors of the market are undoubtedly in far better health than they were at the end of 2009."

He continued: "A strong increase in interest from prospective house purchasers, including many enquiries from overseas, combined with a more realistic approach to pricing by vendors, has helped inject some life into a market that was hit particularly hard by the banking crisis."

What is Prime Property?

Prime property can be defined as being the most desirable, and normally most expensive, property within a particular location. Commonly, the markets where prime real estate can be found tend to have a strong demand from international investors. As such, many prime markets tend to be capital cities and prominent business districts around the world.

In the past, prime property has often outperformed other real estate markets in recent years, Post-global economic crisis, Knight Frank's 2007 Wealth Report found the most expensive worldwide property to have risen on average by 14 per cent year-on-year in 2006, compared to a nine per cent rise in the mainstream market.

What This Means for Property Investment

Singapore is repeatedly named as one of the fastest-growing and strongest worldwide, but it is the high end section of the market which is likely to continue showing signs of property growth in the near future, with other sections of the market likely to remain "flat".

According to a strategist at Swiss bank UBS, values of luxury real estate in the country are set to rise between five and eight per cent in the coming months.

"Luxury properties … could see further upsides. From now till the end of the year, a five to eight per cent price appreciation is not difficult," Kelvin Tay, chief investment strategist at the bank, said.

"The lower luxury segment, at districts nine, ten and 11, might see some positive flows because of the luxury end moving up but I think that will be muted."

Meanwhile, the monthly index suggests that the prime real estate market in the UK has witnessed an increase in buyer and seller activity between May and June.

Andrew Smith, research director at, explained to the Financial Times Adviser: "Despite concerns that the Emergency Budget may have clouded the horizon, the property market did not fare as badly as was feared.

"While the new higher rate of capital gains tax may deter higher earning investors from selling current investments and making new property purchases, the country's huge deficit clearly needs to be dealt with."

However, the fast-growing prime markets are not without their risks, Savills warns that a "second slip" in prime values could be on its way in London, following a dramatic slowdown in the past few months.

Many industry specialists and commentators have been joined by serious investors back to a sector where attractive rental yields can be realised alongside the potential for impressive long-term price growth.

A shortage of prime property is squeezing prices sharply higher at the moment and with the potential to gain an impressive return on investment the sector should continue to thrive.ADNFCR-3415-ID-19876009-ADNFCR

- Friday 09 July 2010

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