Prime property price growth slowing in key global cities
Luxury homes in some of the world’s top cities saw a slowdown in price growth in the last quarter as new taxes, elections, referendums and economic jitters had an effect.
Despite an average annual growth rate of 3.8% some 18 of the 37 cities tracked by the Knight Frank prime global cities index saw their rate of price growth slide in the third quarter of the year compared with the previous quarter.
The rate of growth declined in 48% of the cities tracked by the index. Among them were Vancouver, Toronto, London, Sydney and Melbourne and the report points out that these are all cities where new taxes have been imposed in the last 12 months either in the form of higher stamp duty, additional taxes for foreign buyers or the closing of tax loop holes for non-residents.
Vancouver continues to lead the annual rankings but looks set to surrender the top spot in next quarter having recorded quarterly price growth of only 1.5% in the three months to September.
This compares with a quarterly average of 8.1% recorded in the last four quarters. The report explains that the new 15% tax for foreign buyers and talk of a further tax on vacant homes in 2017 is slowing sales.
Elections and referendums tend to provoke a wait and see approach in the minds of buyers and this has had an effect in the UK due to the vote to leave the European Union and in the United States with the upcoming Presidential election.
Indeed, prime property prices in London fell by 2.1% in the year to September. The report says that stamp duty remains a decidedly bigger influence on the prime London market than the EU referendum and in some instances the uncertainty surrounding Brexit has been a catalyst for overdue price reductions.
In the US the average price of a Manhattan apartment exceeded the US$2 million threshold earlier in 2016 and although sales activity has moderated, luxury prices in New York are proving resilient.
Chinese cities such as Shanghai with price growth of 23.4%, Guangzhou with growth of 14.3% and Beijing up 7.1%, dominate our top 10 for annual price growth but local governments have enacted a range of measures this month to cool demand suggesting a more muted outlook.
Hong Kong, where luxury residential prices are 4.7% below their peak in the second quarter of has halted its decline with prices rising by 4.1% in the three months to September. Strong demand has led to a recent upturn in sales, the report suggests.
In Europe the strongest performer is Dublin with prime property prices up by 5.5% while at the opposite end is Paris where luxury home prices have fallen by 3.8%. It is suggested that due to Brexit and the economic outlook for many countries the EU is second only to Russia and the CIS as the world’s weakest performing world region.
Looking ahead the Knight Frank report says that currency movements will be the single largest determinant of international demand in the world’s top cities over the next six to 12 months.
‘Investors are increasingly looking to the US as their safe haven of choice as the world economy stutters, but a strong dollar will have repercussions globally, it concludes.