People continue to buy expensive homes:

Global super-prime ($10m+) residential sales bounced back in Q1 2023, with 417 sales across the 12 markets tracked in Knight Frank’s new Global Super-Prime Intelligence report. That's up 11% on the 376 recorded in Q4 2022 and the highest volume since Q2 last year.

The biggest market in Q1 this year was Dubai (88 sales), followed by Hong Kong (67), New York (58), Los Angeles (46), Singapore (37) and London (36). While volumes rose in Q1, the total value of sales fell 4% to $7.2 billion. The most expensive average super-prime sales took place in Geneva ($23.8m) and London ($20.4m)

What is perhaps most interesting, though, is how central Dubai has become in the flows of global capital. In 2019, Dubai accounted for 2% of all super-prime sales in the 12 markets that Knight Frank tracks.

Today, looking back at the most recent 12-month period, Dubai now accounts for 17% of all super-prime sales, placing it ahead of London, New York, and Los Angeles.

Part of this jump likely has something to do with the "housing disaster" that Dubai was going through back in 2019. But even still, it is impressive to see just how quickly the city has managed to build and position itself as an alpha global city.

I much prefer walkable cities, but clearly there are enough other people who don't care about that sort of thing.

Knight Frank just published the 17th edition of its annual "The Wealth Report." I have spoken about this report many times before on the blog because I generally find them really interesting. So today I'd like to share two items from this latest one.

The first item is their most recent Prime International Residential Index (PIRI). What this does is track prime residential prices across 100 key city, sun, and ski locations. "Prime", in case you are wondering, is defined as the most desirable and most expensive properties in each market -- generally the top 5%.

Look at Dubai go:

When I see a chart like this I usually start at the top and then immediately start scanning for Toronto. Here, it's more or less in the middle with a 4.1% increase. Totally reasonable. Prime property in Auckland and Wellington, on the other hand, didn't fair as well in 2022.

The second item is this very wonderful diagram showing flight connectivity before Covid (12 months to March 2020) and then post-Covid (12 months to December 2022):

The way to read this diagram is that the most connected cities -- ranked by the number and quality of flight connections -- get pushed toward the center. They also get bigger. Less connected cities, on the other hand, slide toward the edges. All of the cities also generally gravitate toward their main regional connections.

The most obvious change is the greatly weakened connectivity of Chinese cities. This is not surprising given their zero-Covid approach. Moscow also seems to get rightly pushed out to the side.

Another story is the continued rise of both Singapore (to the likely detriment of Hong Kong) and Dubai. I have only been to Dubai once, and I couldn't figure out how to navigate its sea of roads and highways, or how to locate an actual city center where humans walk around (though the historic Bur Dubai area was interesting).

But there is no denying that Dubai has become a pretty important global city.

Michael Beach used to have a YouTube channel where he "looked at Google Maps a lot." Meaning, he would pan around various cities and comment on their planning and overall built form. Technically the channel still exists, but he stopped making new videos a few years ago. Here is one where he talks about Dubai being "an absolute mess" (3.8 million views) and here is one where he looks at North York (in Toronto) and asks: "why is it here?"

The most important point from his North York video is that it illustrates the deep divide that exists in Toronto (and other North American cities) between single-family "Neighbourhoods" (a defined planning term) and higher-density transit nodes, where things like tall buildings are allowed to go.

In the case of North York, this contrast is perhaps at its most stark. Even the street network is designed to stop these two urban forms from commingling with each other too much. There are ring roads that surround the transit-oriented density, and separate, more suburban streets on the other side of it:

This contrast is why there are so many people talking about the "missing middle." And I'm sure that if you started asking random people on the street, most would agree that it would be nice if we could build more moderately-scaled housing. You know, like those buildings you see in Paris.

The problem: Where should it go? Some people would probably suggest the left side of the above ring road. Just don't build as tall, okay? But this kind of land is already a scarce commodity in a city like Toronto. We need these tall buildings because most of the city is codified to look like the right side of the above ring road.

So if we have any chance of actually finding the missing middle, it is going to need to happen here, on the right side. Some progress has been made, not just in Toronto but across North America, with accessory dwellings (laneway suites). But it's not going to be enough.

This was simply a first step. It was us finding a solution to, "how can we add some more housing here without changing the look and feel and character of these residential streets in any way?" But even this small and incremental change has proven to be exceedingly controversial. People still react to new laneway suites like this:

There are complex dynamics at play here.

If you're a homeowner that decides to create a new rental home at the rear of your property, you might be viewed as greedy. You are creating something (a home) that someone needs, and you intend to make a small margin on the transaction. It's like making and selling bread for a small margin, except that selling delicious bread to people is typically viewed in a positive light. On the other hand, ensuring that the value of your house remains as high as possible is generally good practice here. Greed doesn't factor in this way because, you know, single-family homes.

There is no surprise why the missing middle is missing. It is missing because we have decided that we want it to be. But hey, $2,145 per month seems like a very reasonable price for a 2-bedroom house.