Now that stimulus measures have all but disappeared in the United States and the UK, all eyes will be on Europe and Japan and the extent to which they could halt the tentative global recovery.
But overall Knight Franks Global Cities Report forecast has become marginally more negative over the last quarter. Of the eight cities included in the forecast only two are expected to experience prices gains, one to see prices remain stable and five to see prices decline.
New York is back on top with luxury prices across Manhattan expected to accelerate by 5% to 10% over the course of 2015, followed by Sydney with a rise of up to 5% and London no change.
Strengthening foreign interest from Chinese, British, Russian and Latin American buyers as well as improving economic indicators are behind the positive outlook for New York and Sydney is also on the radar of foreign buyers with the added impetus of a limited pipeline of luxury new supply.
Dubai sits at the bottom of the forecast but even here prime prices are only expected to slip by 5% to 10%. Limited supply and a growing appetite from Indian purchasers should cushion the market in the emirate, the report says.
Paris, Singapore, Hong Kong and Geneva are predicted to see luxury residential property prices falling by up to 5%.
The report points out that key European markets, such as Dublin, Madrid, Rome and even Paris, have experienced a long period of declining values and weak demand, but prices in the prime markets in Dublin increased in 2012, followed by Madrid in 2013.
‘We expect to see a greater focus on opportunities in markets like Paris and Rome in 2015 which thus far have been largely overlooked by investors nervous of political uncertainty. These markets are increasingly offering good value when compared to neighbouring alternatives,’ said Kate Everett-Allen of Knight Frank’s international residential research team.
She pointed out that residential markets in the world’s leading cities are well positioned to benefit from both the peaks and troughs of the global economy. ‘In times of crisis the world’s wealthy look to shelter their capital in safe haven assets. In times of economic growth there is an expanding pool of wealth looking for its slice of prime property in the best cities,’ she explained.
‘Since 2009 a number of the key housing markets worldwide have been supported by government stimulus measures. The slow withdrawal of such initiatives in markets such as the UK and the US, along with the potential relaxation of cooling measures in Hong Kong and Singapore, could mean that 2015 sees a more level playing field for the world’s top luxury housing markets,’ she added.
According to the Organisation for Economic Cooperation and Development, the Eurozone poses the greatest risk to prosperity and ‘may have fallen into a persistent stagnation trap’. The UK and the US are expected to be the key engines of growth as the Eurozone and Japan trail behind. But there is an improving picture overall with the global economy forecast to grow by 3.3% this year, 3.7% in 2015 and by 3.9% in 2016.
However, the report points out that the Eurozone crisis has not been resolved and geopolitical risks are rising, in the Middle East, but also now in Ukraine and parts of West Africa. ‘Aside from their potential impact on oil supply and global economic stability, these risks may also increase demand for safe haven assets as seen in 2009,’ said Everett-Allen.
