Global prime city property prices experience a mixed quarterly performance

Prime property prices in key cities around the world continue to outperform the mainstream residential market but it is a mixed picture depending on location, the latest index shows.

The index increased by 3.9% in the year to March 2015 but previous strong performers such as London have slipped back while North American cities have climbed the rankings, according to the prime global cities index from real estate firm Knight Frank.

On average, prime prices in North America and Australia increased by 8.4% and 7.3% respectively in the year to March, whilst Europe’s cities saw prices slip by 0.2% on average.

If we were to omit cities in North America and Australia, the index would have recorded growth of 2.3% instead of 3.9% in the year to March 2015.

North American cities occupy three of the top four rankings for annual price growth with San Francisco, Miami and Vancouver recording annual growth of 14.3%, 12.2% and 11.8% respectively.

The report says that luxury properties are, on average, 46% more expensive than in the second quarter of 2009 when the index hit its financial crisis low.  Eight cities, including London, Dubai and Hong Kong have outperformed the index over the same period.

European luxury homes have, on average, been the weakest performers globally over the last year and the UK general election resulted on slowing price growth in prime central London to 0.2% quarterly due to a ‘wait and see’ attitude being adopted by vendors and buyers alike.

Despite its cooling measures, Hong Kong saw an upturn in annual price growth as tighter mortgage restrictions targeted properties below HK$7 million, shifting the focus of some investors from mainstream to luxury residential properties.

In Moscow, although luxury prices are up 0.6% in local currency terms, the report points out that it is worth highlighting that a large proportion of Russian wealth is held in US dollars and on this basis, due to the weak Rouble, luxury prices have plummeted 38% year on year.

‘The ongoing tussle between globalisation on the one hand and protectionism, foreign buyer restrictions, capital controls etc, on the other is set to dominate purchase decisions for luxury buyers and hence market performance going forward,’ said Kate Everett-Allen, Knight Frank residential partner.