In an increasingly mobile world, high net worth individuals are frequently reassessing their global property portfolios. This has led to the rise of the ‘Super-Renter’: wealthy people who choose to rent prime properties in global cities rather than buy.

For these individuals, convenience and flexibility can outweigh cost considerations. Many prefer renting as it allows them to move between cities with minimal hassle. But others still view property ownership as a way to protect and grow wealth over the long term.

With central banks expected to continue easing policy rates in the coming months, Savills Research has examined the impact of these changes so far on the relative cost of buying compared to renting across 30 global cities.

Methodology

Savills Research analysed the monthly costs of buying and renting prime residential property in each of the 30 cities monitored in the Savills World Cities Prime Residential Index. The analysis assumed non-resident foreign buyers using local mortgage conventions for term lengths and loan-to-value ratios. It did not include the additional costs of buying or holding a property, including stamp duty, legal fees, local property taxes or utilities.

We considered four scenarios: a 50 basis point (bps) increase in interest rates; 50 and 100 bps decreases; and no rate changes to affect changes in the monthly mortgage costs. The changes to monthly mortgage costs were then compared to the monthly rental costs, with red cells showing that renting is less expensive and green cells indicating that buying is cheaper.

Interest rates remain the most critical element of the decision for many individuals as to whether they choose to rent or buy a property in different world cities. With many of the major global central banks now easing policy, interest rates are forecast to come down by around 100 to 150 bps over the next 12 months across Europe and North America, with more modest declines expected in Asia Pacific markets such as Australia, China, and South Korea.

As this feeds into prevailing mortgage rates, this may make buying prime property a more cost-effective option in some markets again. Central bankers are again meeting over the coming weeks to discuss changes to policy rates, buyers are waiting for any indication that rates may fall, making purchasing prime property a more attractive prospect.

Prime residential property funding

Interest rates, loan-to-value ratios and pricing vary widely by country. However, a few consistent trends stand out. Buyers of prime properties – especially non-residents – typically can borrow a lower proportion of the property value, as retail banks tend to be cautious about lending particularly large amounts.

For high net worth buyers, private banks offer alternative financing, though they often require additional assets under management as collateral as well as the deposit. Since these requirements can shift depending on the jurisdiction and lender, it’s essential that prospective buyers consult mortgage professionals.

Regional insights

North America: Markets show a more balanced mix of benefits between buying and renting luxury homes, despite the prevalence of 30-year fixed-rate mortgages. In New York City and Los Angeles, high purchase prices and tax considerations can make renting more appealing, even when buying is technically cheaper on a monthly basis. Miami, however, has seen an influx of wealthy internal migrants looking to establish tax residency, with many purchasing homes, despite a more rental-friendly market. Interestingly, regardless of what the Federal Reserve does in the coming months, the buying versus renting dynamics in each city analysed are not expected to change.

Asia Pacific: Renting is generally more cost-effective for prime real estate, though many still prefer buying as a secure way to store and grow their wealth. Across Asia Pacific, regardless of interest rate changes, renting remains more cost effective than buying prime property.

Europe: Major financial hubs, such as London, Paris, and Geneva, see great prestige placed on ownership, but renting remains an attractive option due to the high costs of prime properties. Cities such as Amsterdam, Berlin, Rome, Milan, and Athens, however, offer a more favourable landscape for buying. These markets have experienced significant capital growth and benefit from recent interest rate cuts.

To buy or not to buy
Monthly cost of buying prime residential property, compared to monthly cost of renting.

Source: Savills Research

Note: Assumes local standard mortgage terms and LTVs for non-resident buyers. Cells coloured green represent less expensive monthly costs for buying prime residential property, while cells coloured red represent less expensive monthly costs for renting prime residential property in each city for each of the interest rate scenarios.