But the Chinese market is bucking the trend with a quarterly rise of 7.9%, according to the latest index from Knight Frank which tracks prime prices in 27 key cities.
On an annual basis average prime property prices in Hong Kong remained unchanged while Jakarta and Dubai saw the strongest year on year growth at 27.2% and 21.8% respectively.
The data also shows that the Middle East was the strongest region with the average price of luxury homes up by 13.1% in the last 12 months.
The index now stands 31% above its low in the second quarter of 2009 and the quarterly figures represent the index’s strongest annual growth since the third quarter of 2010 but its weakest quarterly growth since 2012.
Kate Everett-Allen, head of international residential research, pointed out that a closer analysis shows that the third quarter has consistently been the index’s weakest performing quarter for the last three years.
‘The slowdown can partially be attributed to weaker sales activity in the summer months and this year to the timing of Ramadan. This coincided with quarterly growth rates in Dubai almost halving from 6.1% in the second quarter to 3.4% in the third quarter,’ she explained.
The data shows only five cities have recorded negative growth over the last 12 months. A year earlier, there were eleven cities which fell into this bracket, eight of them European cities.
Everett-Allen said that with the Eurozone crisis abating, economic confidence improving, particularly in influential markets such as the US, the UK and Germany, and the financial markets offering little return, the appetite amongst the world’s wealthy for luxury bricks and mortar is growing.
London has been the best performer in Europe with prices up 7% year on year but the worst performing markets are also European cities. Rome recorded a 7.7% fall in prices year on year and prices have been unchanged for the last six months. Paris saw prices fall 4.3% year on year, then the market recovered slightly to record a 0.5% fall from March to September. In Geneva prices are down 2.8% year on year, down 2.1% in Zurich and unchanged in Vienna.
Asian cities present a mixed picture. At one end Jakarta’s strident economy is fuelling strong wealth creation, resulting in annual price growth in excess of 25%. At the other end, India’s economy is struggling and restrictions which prevent non-Indians purchasing property, means Mumbai’s prime market is treading water, recording only 0.2% growth in the three months to September.
China continues to defy expectations. Beijing recorded the strongest quarterly growth of all the cities in the index in the third quarter with prime prices up by 7.9% over the three month period.
The prime market has outperformed the mainstream market since the collapse of Lehman Brothers in nearly all key cities apart from Hong Kong. Here, mainstream prices have risen 95.5% while prime prices are up by 30.8% since the third quarter of 2008.
