CFA Society Singapore
SINGAPORE (Sept 27): Global cities seem to continue to attract young professionals, despite the high costs of housing, according to Schroders.
In a September report, Tom Walker and Hugo Machin, co-heads of global real estate, securities, says, “Despite the cost, there are sound reasons why global cities continue to attract young professionals. We would argue that it’s misguided to focus on the high housing costs; being located in a global city is good value."
Purchasing a home may not be the priority of someone living in a global city. In the knowledge economy, just being in the right place is more important, even if it means putting off buying a home.
Urbanisation has increased the demand to be in cities that have moved in the global economy from manufacturing goods to ideas.
These cities are seeing a boom in the creative space and the self-fulfilling success of certain cities is not lost on people looking for employment in creative industries. One of the reasons that prices are so high, is that demand to live and work in these select cities remains robust.
In addition, the more “powerful” a city becomes, whether it is political, economic or cultural, the more important it is for people and businesses to be located there.
“The decline of manufacturing physical goods resulted in the new industry - manufacturing ideas. We live in the age of disruption. Cities are one of the greatest beneficiaries of the disruptive economy, as they are the incubators of these ideas,” say Walker and Machin.
Living in a global city allows people, especially graduates to invest their career by accessing experience, resulting in high living costs. But many would see this trade-off as worthwhile.
However, will the gig economy be a threat to global cities?
Firstly, there is a distinction between remote working (working in multiple locations) and working from home. There is often the quip that working from home will reduce the need to be in locations that will incur high costs. But Walker and Machin sees little evidence of this.
On the other hand, remote working strengthens the case for cities, especially those that are at the forefront of idea generation. This has resulted in the rise of co-working spaces and business travel, proving that people need to be in the creative loop.
With the advancement of technology, remote working has been made possible and more convenient.
Although remote working may include one working from home, this is not necessarily the case, as remote working means being in knowledge-rich ‘brain clusters’ with the flexibility to be in an office, co-working or international location as needs dictate.
“It is this demand to be in the centre of the action that has fuelled price growth in global cities and will continue to fuel that growth. We see the disruptive economy consolidating into fewer locations, as our article on ‘Meta Cities’ outlines. In particular, we point to cities where universities and industry collaborate - two examples would be Cambridge in the UK and Boston in the US, both home to a thriving biotech scene – where employment demand for those with the right skills, exceeds supply” say Walker and Machin.
“We think the better way of looking at these high costs centres is to ask whether true global cities actually represent good value, rather than assuming they are expensive? Voting with their feet, many see the cost-versus-career as a worthwhile trade-off,” concludes the duo.
Especially for knowledge workings, the cost of living in a global city will provide ample reward later on in their career.