Markets

The Megacity Economy: How Seven Types of Global Cities Stack Up

Published

6 years ago

February 7, 2017

Jeff Desjardins

The Megacity Economy: How Seven Types of Global Cities Stack Up

Megacity Economy: How Seven Types of Global Cities Stack Up

Back in 1950, close to 30% of the global population lived in cities.

That since has shifted dramatically. By 2050, a whopping 70% of people will live in urban areas – some of which will be megacities housing tens of millions of people.

This trend of urbanization has been a boon to global growth and the economy. In fact, it is estimated today by McKinsey that the 600 top urban centers contribute a whopping 60% to the world’s total GDP.

Seven Types of Global Cities

With so many people moving to urban metropolitan areas, the complexion of cities and their economies change each day.

The Brookings Institute has a new way of classifying these megacities, using various economic indicators.

According to their analysis, here’s what differentiates the seven types of global cities:

Important note: This isn’t intended to be a “ranking” of cities. However, on the infographic, cities are sorted by GDP per capita within each typology, and given a number based on where they stand in terms of this metric. This is just intended to show how wealthy the average citizen is per city, and is not a broader indicator relating to the success or overall ranking of a city.

1. Global Giants
These six cities are the world’s leading economic and financial centers. They are hubs for financial markets and are characterized by large populations and a high concentration of wealth and talent.

Examples: New York City, Tokyo, London

2. Asian Anchors
The six Asian Anchor cities are not as wealthy as the Global Giants, however they leverage attributes such as infrastructure connectivity and talented workforces to attract the most Foreign Direct Investment (FDI) out of any other metro grouping.

Examples: Hong Kong, Seoul, Singapore

3. Emerging Gateways
These 28 cities are large business and transportation hubs for major national and regional markets in Africa, Asia, Latin America, and the Middle East. While they have grown to reach middle-income status, they fall behind other global cities on many key competitiveness factors such as GDP and FDI.

Examples: Mumbai, Cape Town, Mexico City, Hangzhou

4. Factory China
There are 22 second and third-tier Chinese cities reliant on export manufacturing to power economic growth and international engagement. Although Factory China displays a GDP growth rate that is well above average, it fails to reach average levels of innovation, talent, and connectivity.

Examples: Shenyang, Changchun, Chengdu

5. Knowledge Capitals
These are 19 mid-sized cities in the U.S. and Europe that are considered centers of innovation, with elite research universities producing talented workforces.

Examples: San Francisco, Boston, Zurich

6. American Middleweights
These 16 mid-sized U.S. metro areas are relatively wealthy and house strong universities, as well as other anchor institutions.

Examples: Orlando, Sacramento, Phoenix

7. International Middleweights
These 26 cities span across several continents, internationally connected by human and investment capital flow. Like their American middleweight counterparts, growth has slowed for these cities since the 2008 recession.

Examples: Vancouver, Melbourne, Brussels, Tel Aviv

Related Topics:cities economy urbanization globalization megacities global cities

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Real Estate

Mapped: The Growth in House Prices by Country

Global house prices were resilient in 2022, rising 6%. We compare nominal and real price growth by country as interest rates surged.

Published

7 hours ago

June 9, 2023

Dorothy Neufeld

Mapped: The Growth in House Prices by Country

This was originally posted on Advisor Channel. Sign up to the free mailing list to get beautiful visualizations on financial markets that help advisors and their clients.

Global housing prices rose an average of 6% annually, between Q4 2021 and Q4 2022.

In real terms that take inflation into account, prices actually fell 2% for the first decline in 12 years. Despite a surge in interest rates and mortgage costs, housing markets were noticeably stable. Real prices remain 7% above pre-pandemic levels.

In this graphic, we show the change in residential property prices with data from the Bank for International Settlements (BIS).

The Growth in House Prices, Ranked

The following dataset from the BIS covers nominal and real house price growth across 58 countries and regions as of the fourth quarter of 2022:

Price Growth Rank	Country / Region	Nominal Year-over-Year Change (%)	Real Year-over-Year Change (%)
1	🇹🇷 Türkiye	167.9	51.0
2	🇷🇸 Serbia	23.1	7.0
3	🇷🇺 Russia	23.1	9.7
4	🇲🇰 North Macedonia	20.6	1.0
5	🇮🇸 Iceland	20.3	9.9
6	🇭🇷 Croatia	17.3	3.6
7	🇪🇪 Estonia	16.9	-3.0
8	🇮🇱 Israel	16.8	11.0
9	🇭🇺 Hungary	16.5	-5.1
10	🇱🇹 Lithuania	16.0	-5.5
11	🇸🇮 Slovenia	15.4	4.2
12	🇧🇬 Bulgaria	13.4	-3.2
13	🇬🇷 Greece	12.2	3.7
14	🇵🇹 Portugal	11.3	1.3
15	🇬🇧 United Kingdom	10.0	-0.7
16	🇸🇰 Slovak Republic	9.7	-4.8
17	🇦🇪 United Arab Emirates	9.6	2.9
18	🇵🇱 Poland	9.3	-6.9
19	🇱🇻 Latvia	9.1	-10.2
20	🇸🇬 Singapore	8.6	1.9
21	🇮🇪 Ireland	8.6	-0.2
22	🇨🇱 Chile	8.2	-3.0
23	🇯🇵 Japan	7.9	3.9
24	🇲🇽 Mexico	7.9	-0.1
25	🇵🇭 Philippines	7.7	-0.2
26	🇺🇸 United States	7.1	0.0
27	🇨🇿 Czechia	6.9	-7.6
28	🇷🇴 Romania	6.7	-7.5
29	🇲🇹 Malta	6.3	-0.7
30	🇨🇾 Cyprus	6.3	-2.9
31	🇨🇴 Colombia	6.3	-5.6
32	🇱🇺 Luxembourg	5.6	-0.5
33	🇪🇸 Spain	5.5	-1.1
34	🇨🇭 Switzerland	5.4	2.4
35	🇳🇱 Netherlands	5.4	-5.3
36	🇦🇹 Austria	5.2	-4.8
37	🇫🇷 France	4.8	-1.2
38	🇧🇪 Belgium	4.7	-5.7
39	🇹🇭 Thailand	4.7	-1.1
40	🇿🇦 South Africa	3.1	-4.0
41	🇮🇳 India	2.8	-3.1
42	🇮🇹 Italy	2.8	-8.0
43	🇳🇴 Norway	2.6	-3.8
44	🇮🇩 Indonesia	2.0	-3.4
45	🇵🇪 Peru	1.5	-6.3
46	🇲🇾 Malaysia	1.2	-2.6
47	🇰🇷 South Korea	-0.1	-5.0
48	🇲🇦 Morocco	-0.1	-7.7
49	🇧🇷 Brazil	-0.1	-5.8
50	🇫🇮 Finland	-2.3	-10.2
51	🇩🇰 Denmark	-2.4	-10.6
52	🇦🇺 Australia	-3.2	-10.2
53	🇩🇪 Germany	-3.6	-12.1
54	🇸🇪 Sweden	-3.7	-13.7
55	🇨🇳 China	-3.7	-5.4
56	🇨🇦 Canada	-3.8	-9.8
57	🇳🇿 New Zealand	-10.4	-16.5
58	🇭🇰 Hong Kong SAR	-13.5	-15.1

Türkiye’s property prices jumped the highest globally, at nearly 168% amid soaring inflation.

Real estate demand has increased alongside declining interest rates. The government drastically cut interest rates from 19% in late 2021 to 8.5% to support a weakening economy.

Many European countries saw some of the highest price growth in nominal terms. A strong labor market and low interest rates pushed up prices, even as mortgage rates broadly doubled across the continent. For real price growth, most countries were in negative territory—notably Sweden, Germany, and Denmark.

Nominal U.S. housing prices grew just over 7%, while real price growth halted to 0%. Prices have remained elevated given the stubbornly low supply of inventory. In fact, residential prices remain 45% above pre-pandemic levels.

How Do Interest Rates Impact Property Markets?

Global house prices boomed during the pandemic as central banks cut interest rates to prop up economies.

Now, rates have returned to levels last seen before the Global Financial Crisis. On average, rates have increased four percentage points in many major economies. Roughly three-quarters of the countries in the BIS dataset witnessed negative year-over-year real house price growth as of the fourth quarter of 2022.

Interest rates have a large impact on property prices. Cross-country evidence shows that for every one percentage point increase in real interest rates, the growth rate of housing prices tends to fall by about two percentage points.

When Will Housing Prices Fall?

The rise in U.S. interest rates has been counteracted by homeowners being reluctant to sell so they can keep their low mortgage rates. As a result, it is keeping inventory low and prices high. Homeowners can’t sell and keep their low mortgage rates unless they meet strict conditions on a new property.

Additionally, several other factors impact price dynamics. Construction costs, income growth, labor shortages, and population growth all play a role.

With a strong labor market continuing through 2023, stable incomes may help stave off prices from falling. On the other hand, buyers with floating-rate mortgages face steeper costs and may be unable to afford new rates. This could increase housing supply in the market, potentially leading to lower prices.