How much living space does $1 million buy?

For ordinary citizens, prime real estate in Cayman Islands may still look expensive. But according to a report from independent real estate consultancy Knight Frank, that is nothing compared to the tiny monarchy of Monaco. In the most expensive place for luxury real estate worldwide, living space costs roughly seven times more than in the Cayman Islands.  

There is a massive rush to buy luxury real estate worldwide. The current structural low interest rate environment ensures favorable financial conditions, and since the credit crisis more people consider prime residential real estate as the best investments alternative.  

The super-rich, whose numbers continue to grow, are under particular pressure to invest. Many are attracted by the metropolises of the world, even if it is just to own a second or third home in these locales. 

The high demand for prime real estate makes its mark in luxury property prices.  

Luxury living space is expensive, and players in that market need deep pockets. Nevertheless, within that segment, the price differences worldwide are still significant.  

This is also confirmed by data in the Wealth Report 2014, published by Knight Frank.  

The most expensive city, according to this report, is the Principality of Monaco, where $1 million buys just 161.5 square feet of living space. Investors are not getting much more in Hong Kong or London, 221.7 square feet and 271.3 square feet, respectively. Per square meter (10.76 square feet), the prices in Monaco for luxury range between $60,000 and $73,300. 

The cheapest prices among the locations included in the report can be found in Cape Town, South Africa. There an investment of $1 million buys 2,315 square feet. With square-meter prices between $4,200 and $5,100, Cape Town is not really cheap either.  

Of course, this also applies to the Cayman Islands. According to data provided by Knight Frank local partner IRG Cayman, $1 million buys prime residential living space of 1,107.6 square feet on island. That is a lot more room than in Miami, where $1 million equates to 700.7 square feet.  

Other data shows a price decrease for the Cayman Islands in 2013 by 5 percent on average. However, Christian de Meillac, who manages the Caribbean team at Knight Frank, is more optimistic for the future: “The Cayman market is closely tied to the U.S. economy and as their economy grows and international economy recovery continues, we expect the Cayman property market to follow. Even more so, as Cayman is limited in supply and demand is growing.  

“The islands also offers a unique product from the rest of the Caribbean, being a strong business hub, with fantastic facilities, accessibility, beaches and Caribbean climate. The prices, therefore, can maybe go up 3 percent over the next year and 12 percent over the next three years.”  

Additional support for the local market could come from Asia, he says. “We surely feel that there is room for growth in the Caribbean, as indicated by large amounts of Chinese investment across the islands.” 

Globally, there is also no shortage of demand for luxury real estate in sight. On the contrary, the number of ultra high net worth individuals across the globe rose by 3 percent last year, which took the number of people with more than $30 million in assets to more than 167,000 worldwide. Forecasts expect a further increase of 28 percent of UHNWIs around the world by 2023.