London overtakes Hong Kong as 'world’s most expensive city'
PUBLISHED : Wednesday, 24 September, 2014, 2:59pm
UPDATED : Wednesday, 24 September, 2014, 7:54pm
James Griffiths [email protected]
The development of One Hyde Park in London. London has become the world's most expensive city to live and work in, according to real estate firm Savills. Photo: Reuters
Rising rent and a strong pound have made London the world’s most expensive city to live and work in, surpassing Hong Kong for the first time in five years.
According to a new report (pdf) by real estate firm Savills, real estate costs per employee in London have risen to US$121,000 a year. Hong Kong, New York and Paris are not far behind and in all cities the combined cost of renting residential and office space tops US$100,000 per employee per year.
“I don’t think it’s desirable necessarily to be the most expensive city to occupy, but on the other hand, you probably wouldn’t be the most expensive city if you weren’t also the most desirable,” Yolande Barnes, director of world research at Savills, told the Financial Times.
Barnes warned that for prospective renters, “clearly it makes London less attractive compared with other cities employers might look at.”
Property prices in the British capital have risen 18.4 per cent in the past year, Savills said. Office rents have also climbed sharply.
“The vitality of central London locations is at risk as they become too expensive for the types of occupiers that made them attractive in the first place,” the report said.
In contrast, “a combination of falling residential rents and, most importantly, a weakening currency, has increased cost competitiveness in” Hong Kong, knocking the city off the top spot where it has sat for the past five years.
“Prime residential values have been hit hardest as cooling measures take effect, while rents are sliding due to weakening demand from the corporate sector,” the report said. “In the office markets, finance-focused Hong Kong has suffered as firms downsize and consolidate.”
Sun Hung Kai Properties' Twelve Peaks. SHKP listed a super-deluxe house on The Peak for HK75,735 per square foot. Photo: Sam Tsang
Rents in Hong Kong fell in the first quarter of 2014 but have since picked up steam, with average rents at 50 major housing estates in the city hitting a record high in August, according to Ricacorp Properties. This could mean that London’s tenure as the world’s most expensive city is not a long one.
Hong Kong remains the most expensive city in the world in which to buy residential property, with prices 40 per cent higher than in London.
A property on The Peak listed last month was the world’s most expensive per square foot at a whopping HK$175,735, or almost eight times the median monthly domestic household income in the city, according to government figures.
Additionally, despite London surging up the cost rankings this year, the British capital is still far off the record of US$128,000 per employee per year set by Hong Kong in 2011.
The “12 Cities” report is designed to help companies assess the cost of relocating employees. It measures the total cost of renting residential and office space in various cities around the world. Calculations are based on the cost of two seven-person teams representative of a start-up business, located in two representative areas of the city.
