Who next? Tax fears drive wealthy away from London
By Daniel Thomas Property Correspondent
Published: March 23 2010 02:00 | Last updated: March 23 2010 02:00
London has been trumped by New York as the favourite city for wealthy investors and residents, with tax legislation and the attack on City bonuses contributing to its slide in the rankings, according to a survey today.
The 2010 Wealth Report, an annual study by Citi Private Bank and Knight Frank, also showed that the wealthy have not been immune to the wider economic downturn, with the value of property owned by wealthy individuals globally last year falling in three-quarters of the 56 locations tracked.
Liam Bailey, head of research at Knight Frank, said: "The UK's capital has suffered more than many financial centres and there is growing concern among the footloose international elite over threats to the previously stable tax environment."
New York took the top slot in the report's rankings, with London second, followed by Paris and Tokyo .
The report says that the global recession has had a "huge impact on prime property markets".
Property performed strongly in emerging markets at the expense of established locations, with prices in cities such as Shanghai and Hong Kong rising by more than 40 per cent last year as they grew in popularity as places of influence and financial importance.
In contrast, London property prices rose by a comparatively modest 6.1 per cent last year.
However, the report also highlights returning confidence in the prime markets of London and other capital cities as wealthy investors continue to seek real estate as a defensive asset class.
David Poole, head of Citi Private Bank in the UK, said that wealthy property owners were again looking for investments. "Buying becomes opportunistic in a downturn, particularly as people turn to hard assets such as property when other assets experience dislocation."
Monaco remains the most expensive property market, having topped second-placed London last year, followed by Paris and Hong Kong.
Property accounts for one-third of investment portfolios, according to the report, although there has been a sharp decline in the number of wealthy people in each location with investable assets of more than $1m (£666,000, €739,000).
Their numbers in the UK fell by a fifth to 439,000, in the US by 19 per cent to 2.5m, in Russia by 23 per cent to 101,000 and in Hong Kong by 23 per cent to 72,000.
Most of those polled do not expect their wealth to increase significantly in 2010, but only 4 per cent expect it to decline.
Even so, more than 70 per cent of respondents believe this will be a good year to invest in property.
The markets of emerging economic regions recovered earlier, such as in Asia Pacific, where property prices rose 17.1 per cent last year, and South America, which was up 7.8 per cent.
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