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Properties in tech hubs offer investors more promise

London

IF YOU are looking to make money at the top of the housing market, it is time to head to the tech hubs.

Prime properties - broadly defined as the top 5 per cent of residences in a market - in areas like Shenzhen, Berlin and San Francisco have outperformed cities such as Singapore, Paris and New York over the past five years, says data compiled by real estate services firm Savills.

High-end abodes in Shenzhen, one of China's technology centres, led the gains with a 93 per cent price rise in the five years ended in December 2019.

The average cost of such a property there is now US$15,900 per square metre, more than Los Angeles or Moscow.

Berlin, home to a thriving startup scene, rose 53 per cent in the period, making it the best-performing European city ranked by Savills.

San Francisco was the best US performer with a 28 per cent increase.

"The fortunes of different prime real estate markets have closely followed the changing patterns of wealth generation and, in particular, the rise of tech as a source of wealth," said Lucian Cook, head of residential research at Savills.

"Some of the more mature prime markets, where banking and finance have historically played more of a role in wealth generation, have been held back by a combination of regulation, taxation and political uncertainty," he added.

China's economic growth is also reflected in the ranking with six Chinese cities among the 22 tracked by Savills, although the spread of the novel coronavirus may have shrunk some of these gains since December.

Asian property markets have ground to a halt, with home sales in China dropping 90 per cent in the first week of February.

Even as recent gains piled up in tech centres and mainland China, real estate in traditional strongholds remain the most expensive.

Prime property costs on average US$20,700 per square foot in London, US$27,000 in New York and US$49,600 in Hong Kong.

"Some of these more established markets are now looking comparatively good value, which is likely to narrow the divide in price growth," Mr Cook said.

"However, areas that are able to tap into demand from newly created wealth are still expected to perform the most strongly," he added. BLOOMBERG