The Next Global ‘It’ Cities?

WSJ

By Stefanos Chen

A view of Melbourne, Australia Shutterstock

In the global luxury real-estate scene, is Lagos poised to be the next big thing?

The Nigerian city is among a list of 12 up-and-coming luxury markets around the globe, according to the Candy Global Prime Sector Report from design firm Candy & Candy, in cooperation with Savills SVS.LN -0.40% World Research and Deutsche Asset and Wealth Management.

The other cities are Beirut, Cape Town, Chennai, Chicago, Dublin, Istanbul, Jakarta, Melbourne, Miami, Panama City and Tel Aviv. The most expensive city is Tel Aviv, where an entry-level, two-bedroom luxury apartment typically cost $1.45 million in March; the least expensive was India’s Chennai, where a luxury two-bedroom cost around $160,000.

The report considered economic factors, such as job-market potential and gross domestic product, but also a number of qualitative aspects, like cultural attractions and the presence of English as a first or second language.

In 2013, there were nearly 200,000 people world-wide with wealth exceeding $30 million, according to the Wealth-X & UBS World Ultra Wealth Report. As prices continue to rise in prime markets like New York, London and Hong Kong, Yolande Barnes, director of Savills World Research, predicts that luxury buyers will increasingly look to less mature markets for better value.

The cities run the gamut, from well-established markets like Melbourne and Tel Aviv, which have yet to reach their full investment potential, the report notes, to developing markets like Chennai and Lagos, which may have larger returns but more risk for buyers. “You have to look at the political risk,” said Nick Candy, CEO of Candy & Candy, noting that unpredictable currency exchange and ownership hurdles for foreigners in some markets might dissuade some buyers.

In Tel Aviv, the Manhattan Tower attracts cosmopolitan buyers, says Tomer Fridman, CEO of Israel Sotheby’s International Realty. “Ten to 15 years ago, there wasn’t an international product,” he said. Today, the 10,000-square-foot penthouse in the tower is listed for $25 million. He credits the city’s thriving tech industry and interest from Europeans, among others, for the surge in foreign buying.

Other markets on the list are similar to Panama City. The Central American hub is poised for rapid growth thanks to a mix of foreign investment and government policies that benefit international buyers, said Andrea Kam, a consultant for real-estate brokerage Bonavivi in Panama City.

The global recession hit some markets on the list particularly hard, but the report says home prices are rebounding. In Dublin, for example, inventory is tightening and demand is rising, said Graham Murray, head of residential for Savills in Dublin.

 

Write to Stefanos Chen at stefanos.chen@wsj.com