Which will be the prime property hotspots of 2050?

It may be a byproduct of the global economic wobbles but there seems to be a spike of interest in understanding which economies (and consequently which prime property locations) will emerge as winners in the long term.

Just a few weeks after Knight Frank estate agents launched their quest to find the city that will lead the world in 2050, bank colossus HSBC have published a report that predicts which economies will be the world’s biggest in the same year.

HSBC expect China to top the ranks of world economies forty years from now. The US will follow, then India, Japan (despite a massive contraction), Germany, the UK, Brazil, Mexico, France and Canada.

The United States are expected to slide down one place in the ranks of the world's top economies in 2050. Image by Gecco

Combining these findings with prime property market data is a fun if unscientific exercise that can fuel all sort of speculation on which will be the most sought-after prime property locations in 2050: will it be Shanghai and Beijing, seen as China’s per capita income will grow sevenfold in the next forty years, although the Chinese housing market is currently considered to be overvalued? Or will it be New York, which is an established prime property location which is thought to be undervalued?

The truth is that te new economic superpowers won’t necessarily become the world’s new prime property hotspots, although long-term prices should rise hand in hand with economic growth in the new world leaders. Historically, the strongest prime markets tend to be those that combine a solid economy with legal transparency, political stability, security and a wide international draw—something that not all emerging global economies (and indeed developed ones) are likely to provide by 2050.

“A lot of a country’s property appeal has to do with how politically stable it is,” says Giles Hannah of Christie’s International Real Estate. “This is proving very important for international buyers, as is infrastructure, and a good education system. Emerging economies may be very interesting from a a trade and business point of view, but may have some of these issues that may limit property investment. Some people may invest in their own country as well as abroad but global appeal is important–it is one of the reasons that, for example, London is not outshining the rest of the world and has become the second most expensive city after Montecarlo.”

Indeed, a likely scenario is that the wealth generated in the world’s new economic powerhouses will fuel demand for prime properties in established locations.

“My view is that wealth generation in Asia Pacific and other emerging markets is undoubtedly reinforcing investment in these locations and hubs like Singapore, Shanghai and Hong Kong can’t avoid but become wealth hubs,” says Liam Bailey of Knight Frank. “However there is a real issue with governance–the perception especially of the super-rich in many emerging markets that their assets and wealth are not secure from arbitrary policy change or political risk. For that reason, these individuals are arguably more interested in placing wealth in London, Monaco, Switzerland than before.”

So even though we may see a return towards the higher risk, higher return property purchase that characterised the 2000-2007 boom, sought-after cities such as London and Paris, which are very much the destinations of choice for global buyers from emerging markets, may well remain at the top of the property game despite the relative slip of their national economies.

Top ten economies in 2050: economic indicators and property data

Canada

Will Canada be one of 2050's prime property destinations? Image by Mathew Beeton

Rank in 2050: 10
Rank today: 10
Size of the economy in 2050 : 2287 billion
Per capita income in 2050: 51485
Per capita income in 2010: 26, 335
Population in 2050: 44 million
House price growth rate between the third quarter of 2010 and 2011: 4% according to Knight Frank, 2.4% according to The Economist
Prime property cities: none (defined as ranking within the top 20 of Knight Frank’s prime global cities index)
Is the property market under or overvalued? Overvalued by 21% (source: research by The Economist, based on the ratio between house prices and rents)

France

Will Paris be one of 2050's prime property destinations? Image by Leila H

Rank in 2050: 9
Rank today: 6
Size of the economy in 2050 : 2750 billion
Per capita income in 2050: 40643
Per capita income in 2010: 23881
Population in 2050: 68 million
House price growth rate between the third quarter of 2010 and 2011: 6.7% according to Knight Frank, 8.6% according to The Economist
Prime property cities and their market forecast for 2012: Paris, rise by 5%-10%
Is the property market under or overvalued? Overvalued by 48% (source: research by The Economist, based on the ratio between house prices and rents)

Mexico

Will Mexican cities number among the world's prime property destinations in 2050? Image by Jeinny

Rank in 2050: 8
Rank today: 13
Size of the economy in 2050 : 2810 billion
Per capita income in 2050: 21793
Per capita income in 2010: 6217
Population in 2050: 129 million
House price growth rate between the third quarter of 2010 and 2011: Data not available
Prime property cities: none
Is the property market under or overvalued? Data not available

Brazil

Will Rio be one of 2050's prime property destinations? Image by Marcelo Terraza

Rank in 2050: 7
Rank today: 9
Size of the economy in 2050 : 2960 billion
Per capita income in 2050: 13547
Per capita income in 2010: 4711
Population in 2050: 219 million
House price growth rate between the third quarter of 2010 and 2011: Data not available
Prime property cities: none
Is the property market under or overvalued? Data not available

UK

Will London still be a prime property destination in 2050? Image by Sindrome

Rank in 2050: 6
Rank today: 5
Size of the economy in 2050 : 3576 billion
Per capita income in 2050: 49,412
Per capita income in 2010: 27,646
Population in 2050: 72 million
House price growth rate between the third quarter of 2010 and 2011: -0.5% according to Knight Frank, -1.1% according to The Economist
Prime property cities and their market forecast for 2012: London, rise by less than 5%
Is the property market under or overvalued? Overvalued by 29.6% (source: research by The Economist, based on the ratio between house prices and rents)

Germany

Will Berlin be one of 2050's prime property destinations? Image by Susi Wunder

Rank in 2050: 5
Rank today: 4
Size of the economy in 2050 : 3714 billion
Per capita income in 2050: 52683
Per capita income in 2010: 25083
Population in 2050: 71 million
House price growth rate between the third quarter of 2010 and 2011: 2.8% according to Knight Frank, 2.6% according to The Economist
Prime property cities and their market forecast for 2012: none
Is the property market under or overvalued? Undervalued by 12.2% (source: research by The Economist, based on the ratio between house prices and rents)

Japan

Will Tokyo be one of 2050's prime property destinations? Image by Shortben

Rank in 2050: 4
Rank today: 2
Size of the economy in 2050 : 6429 billion
Per capita income in 2050: 63244
Per capita income in 2010: 39435
Population in 2050: 102 million
House price growth rate between the third quarter of 2010 and 2011: -3.2% according to Knight Frank, -3.6% according to The Economist
Prime property cities and their market forecast for 2012: none
Is the property market under or overvalued? Undervalued by 35.2% (source: research by The Economist, based on the ratio between house prices and rents)

India

Will Indian cities number among the world's prime property destinations in 2050? Image by Rajaram R

Rank in 2050: 3
Rank today: 8
Size of the economy in 2050 : 8165 billion
Per capita income in 2050: 5060
Per capita income in 2010: 790
Population in 2050: 1614 million
House price growth rate between the third quarter of 2010 and 2011: 13.9% according to Knight Frank
Prime property cities and their market forecast for 2012: Mumbai down by 5% to 10%
Is the property market under or overvalued? Data not available

US

Will New York be one of 2050's prime property destinations? Image by Diogo Ferrari

Rank in 2050: 2
Rank today: 1
Size of the economy in 2050 : 22270 billion
Per capita income in 2050: 55134
Per capita income in 2010: 36354
Population in 2050: 404 million
House price growth rate between the third quarter of 2010 and 2011: -3.9% according to Knight Frank, -4.1% according to the Economist (Case-Schiller), -1.3% according to The Economist (FHFA data)
Prime property cities and their market forecast for 2012: New York, stable, Los Angeles (forecast not available)
Is the property market under or overvalued? Depending on the price index used, overvalued by 10.2% or undervalued by 7.7%

China

Will Shanghai be one of 2050's prime property destinations? Image by Gary Tamin

Rank in 2050: 1
Rank today: 3
Size of the economy in 2050 : 24617 billion
Per capita income in 2050: 17372
Per capita income in 2010: 2396
Population in 2050: 1417 million
House price growth rate between the third quarter of 2010 and 2011: 8.9% according to Knight Frank, 6.4% according to the Economist
Prime property cities and their market forecast for 2012: Beijing, rise by 5% to 10%, Shanghai down by 5% to 10%
Is the property market under or overvalued? Overvalued by 12.9%