The ultimate second-city investment guide


Why are global investors shunning gateway cities in favour of greater opportunities in secondary markets?

Like every cultural and economic cycle, the emergence of secondary cities on property buyers’ radar tends to occur when core investment markets hit boiling point, and there is no disputing that London, New York City – and other key US cities – and Sydney have done just that in the last couple of years.

The urbanisation of many smaller cities has paved the way for such locales to welcome a surge of capital and real estate investments, stimulating their metamorphosis as one of the most liveable places in their respective countries.

It no longer only the great coastal cities in the US  that can be alive around the clock and on weekends. Downtown transformations have combined the key ingredients of housing, retail, dining, and walk-to-work offices to generate urban cores, spurring investment and development and raising the quality of life for a roster of cities.

Similarly, greater metropolitan areas in the United Kingdom, one of the priciest markets in the world, have been relying on the gentrification of their popular neighbourhoods as foreign capital flows in, whilst highlighting their existing attractions and cultural identities. And in Australia, investors are gravitating towards exciting buyers’ markets, which is where the flow of investments are concentrated.

Examining the strengths, recent performance and investment trends in the following nine cities, we present the ultimate second-city investment guide for 2015.


On the face of it, Houston, Miami and Oakland don’t appear to have much in common. Houston is a Texan metropolis, known for its energy industry, Miami is famed for its friendly Florida climate and beaches, whilst Oakland is a gritty California port city frequently overshadowed by its near neighbour San Francisco. Yet, while these three conurbations are far from being obvious soul brothers, they are currently among the hottest tickets for real estate investment in the United States.

The property sector in the US has not had its trouble to seek in recent times. It was the credit crisis resulting from the bursting of the housing bubble that was generally cited as the primary cause of the recession in the US between 2007 and 2009.

The road back from the brink has been long and painful, with house prices bottoming out as recently as 2012. The pace of recovery continues to be slow, but indications are that the sustained performance of the commercial real estate industry looks set to continue this year, fueled by improving fundamentals and robust investor appetite, both domestic and foreign.

One of the more interesting investment trends to appear in recent times is the emergence of the so-called ‘secondary cities’ as serious contenders. In its annual outlook entitled ‘Emerging Trends in Real Estate’, PwC identified the continued rise of markets other than the largest coastal cities as top choices for overall real estate prospects.

Commenting on the report, Patrick L Phillips of the Urban Land Institute, says: “Investors are looking closely at opportunities beyond the core markets. These secondary cities are positioning themselves as highly competitive in terms of livability, employment opportunities and recreational and cultural amenities.”


In the case of Houston, which usurped San Francisco as a favourite in PwC’s list for 2015, much of its success in attracting domestic and foreign investment lies in its status as the energy capital of the Western world. The city is also the number one job creator in the US by a sizeable distance and cost of living is comparatively cheap. Meanwhile, its ethnically diverse population (it is the most racially mixed large metropolitan area in the US) has given rise to a thriving dining scene and was referred to by The New York Times as “one of the country’s most exciting places to eat.”

Commercial, residential and land values have escalated dramatically over the past three years and are expected to withstand, generally, the current market cycle created by lower oil prices. In a report published by Cushman & Wakefield, commercial property investors spent USD13.1 billion in Houston in the year through October 2014.

Last year was Houston’s strongest year ever for home sales. And with inventory tight, home prices increased sharply with the average price of a single-family home jumping 10.3 percent, year-on-year, to USD271,232.

However, the Houston Association of Realtors warns that falling oil prices may bring a slowdown in 2015. The plunge in crude prices could reduce the creation of new jobs to nearly half the level of last year’s total, which would mean slower home sales.

“Price and rent increases at double-digit levels are neither sustainable nor really desirable,” comments James P Gaines, research economist at the Real Estate Centre at Texas A&M University. “During 2014, record prices were achieved for individual commercial and residential properties as general price level increases. 2015 is a difficult year to predict as no one knows what oil prices are going to do. However, the effect of lower oil prices, actually fuels growth and expansion in downstream refining and petrochemicals – where billions of dollars of capital spending are already underway.”


  • Houston is the fourth most populous city in the US, trailing only New York, Chicago and Los Angeles
  • More than 90 languages are spoken throughout the Houston area
  • Houstonians eat out more than residents of any other city in the US and there are more than 11,000 restaurants ranging from award-winning venues to memorable deli shops


Although Houston’s appeal as an investment destination is largely based on its underlying solid economic credentials, over in southern Florida there’s much more of a wow factor at play. With its golden beaches and spotless climate, Miami has a reputation as one of the most desirable cities in the US in which to live, and its appeal continue to soar due to an array new developments that utilise the talents of world-class architects and interior designers, including, among others, leading Miami developer Fortune International Group’s Sunny Isles Beach-based Jade Signature project, designed by Pritzker-award winning architecture firm Herzog & de Meuron.

“Miami is very different from New York, Los Angeles and San Francisco, since it is the youngest market of them all,” says Edgardo Defortuna, CEO of Fortune International Group. “This has the inherent advantage that the infrastructure and quality of construction looks relatively new.”

Property prices in Miami (at around USD550 per square foot for luxury urban properties in pre-construction), while comparing favourably to other US cities, are not exactly low, meaning that rental yields are not especially attractive. Some developers, however, offer incentives such as Lease Back Programs where net rents of around 6 percent are offered to the unit buyer for a period of three years.

“Miami has become an amenity in itself, since it possesses one of the largest number of golf courses, tennis courts, marina slips and linear feet of waterfront properties per inhabitants in the world,” adds David Landau, a senior broker at Miami Real Estate Invest.


  • Miami has more than 800 parks and is the only city in the US that is bordered by Biscayne National Park and Everglades National Park
  • Miami is the only major city in the US to be founded by a woman
  • With more than 800 buildings, Miami Beach’s Art Deco district is home to the world’s biggest collection of Art Deco architecture

Oakland Oakland

Like Miami, Oakland at the Bay Area is another stateside market that is heating up fast. Home values grew a staggering 19.6 percent in 2014 and are projected to rise by another 7.1 percent over the next year. But the Bay Area’s boom, with San Francisco as its primary hub, hasn’t been to everybody’s liking. Oakland has traditionally been a blue-collar city and housing rights activists representing lower-income residents in the Bay Area have publicly expressed alarm at the ongoing gentrification and rising house prices.

Investments from Asia – China in particular – are helping to fuel the boom. Last year, ground was broken on Brooklyn Basin, a USD1.5 billion development along a decrepit stretch of industrial waterfront in Oakland. The project, developed in collaboration with local planners and China-based Zarsion Holdings, could bring roughly 3,100 new residents and 200,000 feet of retail space to Oakland by 2021 and is just one example of major Chinese real estate investments in the Bay Area.

“It is a natural phenomenon,” says Nolan Jones, a partner at Bay Property Group, an Oakland-based developer. “More than 30 percent of the population in San Francisco is Chinese so it is natural that Chinese homebuyers are gravitating towards the culture they are familiar with.”

  • Oakland is the only city in the world with a natural saltwater lake, Lake Merritt, wholly contained within its city boundaries
  • The city has more artists per capita than any city in the country
  • Oakland was the home of the very first Mai Tai


With its ubiquitous and often multiple listings in many ‘liveable cities’ indexes year after year, the country has become a target for foreign homebuyers in search of the enviable lifestyle Australian cities can offer.

Australia’s second largest city after Sydney, Melbourne, for example, leads the most recent Global Liveability Survey by the Economist Intelligence Unit (EIU), and also boasts of the ‘world’s friendliest city’ title given in 2014 by Condé Nast publication Traveller.

Desirable living conditions aside, Australia also attracts investors and migrants because of its transparent real estate sector and relatively stable economy, in addition to offering a very high standard of education and a steady 5.9 percent unemployment rate.

“Australia has a strong domestic economy, favourable tax structures available for investors, low vacancy rates across all major metropolitan cities, quality construction and strict government regulations and bodies that oversee quality and protect investors from fraud,” says Paul Barratt, managing director for CBRE Residential Projects. “Buyers who invest in Australia do so knowing that their money is well protected in a high regulatory environment.”

However, the high cost of living in Australia’s biggest urban areas, as well as the steadily rising prices of properties in top-tier cities, have led investors to consider other real estate options in the country’s secondary cities.

Averaging AUD680,000 (USD523,000), home values in Sydney have soared by 13.7 percent over the last 12 months, ahead of any capital city, according to the latest figures released by CoreLogic/RP Data in early March.

In comparison, secondary cities like Adelaide, Perth and Brisbane have recorded either flat growth or falling prices in the same period, making these locations instantly more attractive to prospective homebuyers based on their price offerings.

“As Melbourne and Sydney become more expensive, foreign investors are increasingly looking to other capital cities across Australia,” says Scott Holmes, Asia business development manager at, the REA Group’s Chinese-language real estate portal, which, according to Holmes, has seen an increase in the number of enquiries for Adelaide, Perth and Brisbane from the mainland in the last 12 months.


Brisbane in Queensland has long been touted as a standout in the country’s booming real estate sector. Currently a favourite among investors from China and Singapore, notes John Fitzgerald, operations manager of luxury developer Billbergia Pty Ltd, the city has seen the highest city growth rate of 11.2 percent, in contrast to 8.1 percent in Sydney and 10.4 percent in Melbourne. Brisbane’s Gross Domestic Product is also expected to grow by almost 100 percent in the next 20 years.

“This is why Billbergia decided to invest in Brisbane, as we believe that our customers can achieve good returns on their investments, equaling if not bettering those in all other Australian cities,” Fitzgerald explains.

In fact, in his 2015 residential market outlook, Tim Lawless of think tank CoreLogic/RP Data says that Brisbane and Adelaide are among the capital cities that could witness capital gains to be higher this year than in 2014, when they reported 7 percent and 3.5 percent, respectively.

Experts believe that buyers are also shifting preferences when purchasing Australian property, impacting new developments in capital cities.

“Australia is undergoing a lifestyle shift away from traditional homes with backyards, towards a preference for luxury apartments close to the city hubs, to transport, education and shops,” notes Iwan Sunito, CEO of Crown Group, one of the leading developers in the country. “Demand is strong for apartments close to transport and education.”

  • The third largest urban area in Australia, Brisbane has become a true global city, hosting events such as World Expo ‘88 and the 2014 G-20 Summit
  • Brisbane boasts of a thriving live entertainment and music scene
  • Asian Australians – from Mainland China, India, the Philippines, Vietnam, Malaysia and South Korea – comprise its largest ethnic minority group

AdelaideAdelaideIn South Australia’s capital city Adelaide, the next highest ranking urban area in the EIU list – beating Sydney – median unit prices of residential apartments in 2014 as reported by Price Finder was well below Sydney’s 8 to 12 percent. Furthermore, modest gains in prices last year of between 2 and 3 percent, placed Adelaide in fifth place in the nationwide ranking, and presently shows a lot of growth potential to become a top-performing real estate investment destination for years to come.

Adelaide has recently welcomed some high profile, foreign-backed developments aided by the Significant Investor Visa, which requires a minimum AUD5 million (USD4.09 million) investment in the Australian economy. Among the overseas-backed projects include the Aria on Gouger, a AUD36 million (USD29.52 million) project by Datong Australia, local arm of China’s Datong Group, and The Rowlands Apartments, a luxury rental residential building in Central Adelaide valued at AUD55 million (USD45 million).

Amanda Lynch, CEO of the Real Estate Institute of Australia (REIA), a national professional association of realtors, says that “the topic of foreign investors, particularly Chinese investors, pricing out Australian buyers has recently received a lot of media coverage prompting a government inquiry to examine whether foreign investment in real estate is being administered properly by the Foreign Investment Review Board (FIRB).”

She contends that, on the contrary, foreign investment in residential real estate has been proven to help increase supply at time when there is a chronic undersupply of housing across the country, and that there is no definitive conclusion yet on whether affluent foreign buyers do price out first-time domestic buyers.

  • Adelaide is Australia’s fifth-largest city with a large population of international students, earning its nickname ‘Learning City’
  • Because of its progressive history and widely regarded religious tolerance, Adelaide is also known as the ‘City of Churches’
  • Named the most livable place by the Property Council of Australia from 2011 to 2013


Perth in Western Australia, another ‘liveable city’ favourite that expects its market to rebound at the end of the year, is a good example of a secondary city that can meet this consumer preference.

Two of the latest high-end developments in the remote metropolitan area, Queens Riverside from Singaporean-backed Frasers Property and One Richardson by local developer Devwest, have received enthusiastic responses from local and international buyers. Both luxury projects are only a short distance from the CBD and several leisure attractions, which residents can also reach via free public transport services that the city offers.

In a recent government report on foreign investment in residential real estate, Kelly O’Dwyer, chairman of the House of Representatives Standing Committee, commented: “As a relatively small nation, Australia will continue to rely on foreign capital to help grow our economy and provide jobs. In the case of housing, foreign investment creates more dwellings for Australians to build, buy and rent.”

Based on her findings, O’Dwyer concluded: “Australians must have confidence that the rules, including those that apply to existing homes, are being enforced. Our inquiry revealed, that as it stands today, they could not have that confidence.”

Despite the public scrutiny, reasons to invest still remain, and insiders recommend that now is the right time to buy.

“The boom always starts in Sydney, followed by Melbourne. This occurred in 2014 and still continues,” comments Dominique Grubisa, CEO of Australian Investments and Migration Pty Ltd (AIM), a regional firm that aims to educate Asian buyers when entering the Australian property market. “Next to move will be Brisbane, then Perth and Adelaide. At present those three capital cities are neutral or perhaps even buyer’s markets, so now is the time when the smart money will get in there. Other regional areas will then follow suit.”

  • Australia’s fourth-most populous metro area has had a mining boom in the last hundred years, aiding its local economy
  • The famous Swan River in Perth was one of the first settled areas in Western Australia
  • Perth’s commuter rail systems offer free public transport for people with disability as well as pensioners, and Central Area Transit (CAT) buses are also free of charge to all users

United Kingdom

One of the most coveted real estate markets in the world, the United Kingdom, specifically its capital London, has traditionally been considered a safe haven for property investments because of its transparent financial and legal structures.

Moreover, the UK’s numerous cultural attractions, high educational standard and geographical advantage all contribute to its appeal to global investors.

But as local and international buyers continue to be forced out of the London market, currently home to some of the most expensive property transactions in the world, homebuyers have set out their sights on smaller cities where they can get better value for their hard-earned pound.

Manchester shutterstock_86751739

The north’s biggest city is still recovering from the 2008 crash, and although growth in home values has been sluggish, urban development, new infrastructure projects, and strong fundamentals offer steady growth prospects and lower risk than many other overinflated markets.

Average house prices in Manchester just tip the scales on GBP150,000 (USD227,000), and sales records from leading UK property search company Zoopla, show the market has risen by 5 percent since January 2014, marking a significant acceleration in value appreciation, as average house prices in the city have gained just GBP11,000 (USD16,600) in the last five years – an 8 percent growth since 2010.

The property market in the north of England has not benefitted from the post-crisis boom seen in London and the southeast, meaning average house prices have failed to recover to 2007 peaks. Subsequently, leading UK estate agency Rightmove presently puts Greater Manchester among the most sluggish markets, forecasting 19 percent over the next five years.

By and large, there have been few new build developments since the crash, although new stock is now coming onto the market. Rental yields have recovered over the last five years or so, which is improving returns for buy-to-let investors.

Still, there are a number of major regeneration projects on the cards, including the GBP100 million (USD151 million) Town Hall complex and a GBP113 million (USD170.49 million) regeneration scheme throughout the Greater Manchester area.

Seemingly unrelated business decisions have also raised the profile of the local market. When the Peel Group completed its Media City development in Manchester in 2012, some 2,500 BBC staff relocated to the site. Through 2013, nationwide estimates showed that Manchester property prices increased by 21 percent, with the BBC relocation playing a major factor in surging values. The Media City locale has since become one of the city’s most desirable neighbourhoods.

Nowadays speculators are buying up homes in the city as they bet on a price boom off the back of the planned High Speed Two (HS2) national rail project, which, pending government approval, will connect major British cities through a new high speed transport system, cutting journey times from Manchester to Central London to just over 60 minutes, and increasing the city’s appeal to buyers.

  • Named by the Economist Intelligence Unit in 2013 among the world’s 50 most livable cities, ahead of London, New York and Rome
  • Third-most visited city in the UK offering spiriting and cultural distractions, and great affordability
  • For lovers of the great outdoors, the Pennines and the Peak District offer a taste of adventure


Like Manchester, property values in Birmingham have risen 5 percent in the last 12 months, compared to the nationwide average of 9 percent, signaling a positive development. Birmingham previously lagged behind other cities as the UK property market boomed in the post-recession years, but investors are moving in fast as they see strong upside potential. Based on sales data, Zoopla currently estimates that the average house price in Birmingham stands at just over GBP160,000 (USD241,000), considering the oversupply in the local market.

“There has been a major step change. It is easy to get carried away with it, but the change in a short period of time has been incredible,” Knight Frank partner Mark Evans told local media last summer. “The demands that we are seeing for residential accommodation in Birmingham has fundamentally changed in the last six months. I have been in Birmingham for 14 years and I have never seen anything like it.”

The development pipeline in Birmingham is currently slim, as developers baulk at slow growth and low demand. This housing glut may not last long though, as Birmingham benefits from sky-high prices in London, which have backed many investors out of the market.

Even sovereign wealth funds and pension funds from Asia and North America are looking for deals in secondary cities. In fact, the Urban Land Institute and PwC’s joint report, ‘Emerging Trends in Real Estate’, highlights Birmingham’s growing appeal, climbing 14 places to sixth among Europe’s top cities for property investors. Notably, overseas buyers are drawn to the popular suburbs of Edgbaston and Harborne.

“Whilst major cities like London risk generating a property bubble, Birmingham’s new developments and its rising general-added-value – which is increasing more than any other UK core city (at six percent per year) – are creating a sustainable investment destination for companies across the world,” said Neil Rami, chief executive at Marketing Birmingham, an inward investment body.

The upcoming HS2 rail project will also cut commute times to London from 85 minutes to 50 minutes, and estate agents expect this will increase demand and further boost property values in the city, which Zoopla pegs at an average of 8 percent growth in the last year, rising to GBP378,000 (USD571,000) – GBP68,000 (USD103,000) more than they were five years ago, in which time values have appreciated by more than 20 percent.

  • Birmingham is currently undergoing an identity overhaul as it evolves from an old industrial town into a thriving UK metropolis
  • Named the sixth most investable city in Europe for property players because of numerous regeneration projects that help modernise the city
  • Thousands of new businesses open annually, attracting consumers and visitors


Major UK estate agent Savills is even more bullish on the Cambridge property market, suggesting that the average house price within Cambridge city limits has increased 10 percent, year-on-year, and by 8.5 percent in the surrounding areas. Savills’ five-year growth outlook projects 24.5 percent rise in property prices, and this has spurred new developments in the region.

Home to one of the best universities in the world, as well as a burgeoning tech destination – Microsoft UK recently set up its headquarters in the city – Cambridge certainly has a lot going for it vis a vis livability and rental affordability compared with London, and it is gradually becoming very popular with international investors, who make up 17 percent of the local market, including 1 percent coming from Asia.

Attracted to the a balance of culture, entertainment and city living, tenants have shown high demand for rental properties, pushing up rents in the city as well, which is good news for buy-to-let investors. If future plans for a 125 mph high-speed train line come to fruition, by 2018 it will only take 30 minutes to reach central London, making Cambridge an even more enticing destination for property investors and homebuyers alike.

  • Cambridge’s world-famous university is at the heart of the city’s cultural and intellectual revolution
  • Historic architecture is everywhere, including the Imperial War Museum, which hosted the filming of the 2014 motion picture The Monument Men
  • A hub for the biotech field, the city is increasingly dominated by research and technology companies

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