Top end property markets in key global cities see price growth slowing, down to 2.6%

Prime property price growth in key cities around the world is falling, up just 2.6% in the 12 months to June 2018, the weakest annual rise since the first quarter of 2012, the latest index shows.

Overall, the number of cities registering double digit annual price growth fell from seven to just three, quarter on quarter, according to the date from the prime global cities index from international real estate firm Knight Frank.

Guangzhou in China recorded the biggest annual price rise of 11.9% but this was down 16.1% from the first quarter of the year. Next was Singapore, up 11.5%, followed by Madrid up 10.3%, San Francisco up 9.5% and Tokyo and Edinburgh, both up 9.4%.

At the other end of the index, which tracks 43 cities, prices fell by 8.4% year on year in Stockholm, were down by 4.7% in Vancouver, down by 3.8% in Rome, down by 2.7% in Taipei, and down by 2% in Istanbul.

Prices were unchanged in Dublin, up by just 0.1% in New York, by 0.3% in Vienna, by 0.3% in Kuala Lumpur, by 0.5% in Milan, by 0.6% in Mumbai, by 1% in Monaco and by 1.5% in Jakarta.

According to the index analysis prices in Singapore have rebounded strongly but recent stamp duty changes may have an impact going forward and Cape Town and Dublin are seeing prime price growth soften but for very different reasons.

The rate of annual growth in Cape Town has halved in the last six months from 19.9% to 8.2%. The index report says that the citywide drought and the uncertainty over the process of land expropriation without compensation has weakened sales activity. However, six weeks of solid rainfall and new land guidance from the Government has mitigated this concern and sales volumes are strengthening again.

By contrast in Dublin where price growth has stalled, it is tighter lending rules, rising luxury supply and a reduction in sterling denominated buyers which is leading to more moderate price appreciation.

Kate Everett-Allen, partner for international residential research at Knight Frank, explained that the decline in the overall index’s performance is not due to a rising number of cities registering an annual decline. Instead, the weaker growth is due to the top performing cities rising more slowly.

The gap between the strongest and weakest performing city has shrunk from 33 to 20 percentage points in the last quarter. ‘The introduction of new, and the strengthening of existing, property market regulations, along with the rising cost of finance and a degree of political uncertainty is resulting in more moderate price growth at the luxury end of the world’s top residential markets,’ she said.

She pointed out that Singapore has accelerated up the annual rankings to second place and this may be because high land bids by developers has translated into higher new build values. In an attempt to curb price inflation, the authorities announced further increases to the Additional Buyer Stamp Duty in July and this includes higher rates for foreign buyers at 20% and for developers at 30% as well as tighter lending rules.

Hong Kong has also introduced a new cooling measure, a new vacancy tax. Under the new rules, developers will incur a penalty, 200% of the annual rental value, if new apartments are left unsold and empty for six months or more.

In the United States it is San Francisco with annual growth of 9.5% and Los Angeles at 7.8% leading the national increases. Everett-Allen said that the US economy is firing on all cylinders and housing demand has been boosted by a buoyant labour market.