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.

We have spoken before about how the average wait time for public housing in Hong Kong is now over 6 years. This is a problem for the quarter million people who are on this list, and so the city has decided to start building modular housing as a kind of stopgap:

The city has embarked on a $3.3 billion plan to build about 30,000 temporary apartments over the next five years, which Housing Secretary Winnie Ho has said is a “very important social project.” The aim of the program is to give people an option to move out of cramped quarters while waiting for public housing. Critics say it only shows the government’s inability to deliver enough permanent homes.

I think many would agree that "light public housing", which is what this is being called, is probably better than no public housing. But is this really the most effective move? According to some sources, this light varietal may actually cost more to build than their typical public housing.

So why even bother? Is it just speed? I'm not sure.

Also, it is interesting to note that even in a city as dense, built out, and in need of housing as Hong Kong, finding support for new development can be a challenge:

“We understand that Hong Kong needs land to build public housing for people in need, so we never objected until this time,” said Andy Ng, an accountant who bought an apartment in the Upper RiverBank project early last year. The government is squeezing thousands of people on a single plot of land without planning or consultation, he added. “The district simply can’t stomach so many people.”

There's lots of data out there to suggest that there is a correlation between urban density and housing unaffordability. Take Hong Kong. It is very dense, and also one of the most expensive housing markets in the world. But I think the real question is: does urban density actually cause housing unaffordability, or do the two simply tend to be correlated when you plot a country's biggest cities?

One the one hand, there are factors that do drive up home prices when you build more densely. Building a reinforced-concrete high-rise is always going to be more expensive on a per square foot basis than building a wood-framed bungalow. But of course, the former also uses land a lot more efficiently, which is what you need to do in big and supply-constrained cities.

Michael Lewyn's view (credit to Robert Wright for sending me the article) is that density is incorrectly used as a scapegoat to fight compact development. It does not actually cause higher rents. One counter example he gives is that of Manhattan, which went from 2.3 million people in 1910 to just under 1.7 million in 2020. In other words, it got less dense, while at the same time its rents grew exponentially.

Like most important city matters, the answer is complicated. But this is an interesting topic that I think we should spend more time on here.